Market Scan says data shows dealerships aren’t offering manufacturers’ promos if markups restricted

Dealerships still are likely to present cash-back offers, a form of automaker incentive that can be applied to financing allowing interest rate reserve, West said. But special programs forbidding dealerships from adding margin are “for the most part not being presented to consumers,” West said.

Some of these no-margin programs might still pay a dealership a flat amount of a few hundred dollars per deal, West said. But a dealership selling a hypothetical $50,000 vehicle would make more by sending the deal to a lender who will allow the retailer to add 3 points of reserve to the interest rate, he noted.

West said a captive finance company really has two customers: the consumer and the dealership. If automakers wish the market to use their programs, “they need to meet the needs of both the dealer and the consumer,” he said.

A captive might not like how dealerships are doing business, but “you don’t really have a way of controlling it,” he said.

West said Market Scan noticed dealerships ceased to present incentives when inventory dropped to the point that “very high profits” existed on every vehicle.

“Then the dynamic was, ‘Let’s make the most we can on every transaction,’ ” he said.