A holdback is used by banks or finance companies that choose to hold back a certain amount when paying a sales company for taking the ownership of an installment car loan. The holdback amount reduces the proceed amount owed to the dealership selling the loan

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Holdbacks are sometimes based off a certain percentage of the MSRP or used to holdback a certain fee such as sales of GAP or service warranty products. A finance company may also choose to use a different holdback strategy for each sales company that they do business with.

Holdbacks may be used to offset future losses in case a repossession or a charge off happens. Then, instead of paying this amount to the sales company, the finance company will keep these funds. Some finance companies holdback a certain amount and pay out the funds after a certain amount of payments are taken, after a period of time or another instance. This agreement is made at the transfer of the loan, and is typically known as a reserve by the dealership.

Let’s not confuse the holdback amount with the discount amount. A discount amount is an agreement between the BHPH dealership and the finance company where the sales company is selling the loan to the finance company at a discount, which also reduces the sales company’s profit, but the finance company may still receive this amount from the customer.

Deal Pack Pro is capable of entering, tracking, and paying out these amounts to the dealerships. If you have any questions, please contact our Support Team at 800-526-5832.