What is MSRP?
Quick insights
- Manufacturer's Suggested Retail Price (MSRP) is the price that the manufacturer recommends dealerships sell a vehicle for.
- MSRP is often higher than the invoice price, which is what the dealership pays the manufacturer for the vehicle.
- MSRP includes the base price of the vehicle, optional equipment installed by the manufacturer and a destination charge, but it doesn’t include added charges like taxes and dealership fees.
Ever wonder what's behind the MSRP on a car's price tag? That's the Manufacturer's Suggested Retail Price, and it’s a key factor that influences your vehicle's cost and your negotiating power. Let’s take a closer look.
What is MSRP?
MSRP is the price that the manufacturer recommends dealerships sell a vehicle for. It's a benchmark that helps to standardize the price of a vehicle across different locations and dealerships. However, the actual selling price of a vehicle can be negotiated and may end up being lower than the MSRP.
The MSRP is determined by the manufacturer and includes the base price of the vehicle, any optional equipment installed by the manufacturer and a destination fee. The destination charge is a fee for delivering the vehicle from the manufacturing plant to the dealership.
Why does MSRP matter?
MSRP matters because it provides a starting point for negotiations when buying a vehicle. Dealerships have the discretion to sell a vehicle at, above or below the MSRP. However, the MSRP provides a reference point that buyers can use to ensure they are getting a fair deal.
It's also worth noting that while the MSRP is a useful benchmark, it does not include other costs associated with buying a vehicle, such as taxes, registration fees and any additional dealer fees. Therefore, the actual cost of buying a vehicle may end up being higher than the MSRP.
MSRP vs. invoice pricing
When it comes to car pricing, understanding the difference between MSRP and invoice pricing can be a game-changer. The invoice price is what the dealership pays the manufacturer for the vehicle, and it's often lower than the MSRP—the price that the manufacturer recommends dealerships charges for a vehicle. This difference in price points can provide a valuable negotiation tool when buying a vehicle.
If the invoice price is lower than the MSRP, there may be room to negotiate the selling price down. However, it's important to note that the difference between the MSRP and the invoice price is part of the dealership's profit margin. This means that while the dealership may be willing to negotiate, they are unlikely to sell the vehicle for less than the invoice price.
Additionally, dealerships may also receive other incentives and rebates from the manufacturer, so the profit margin may be higher than the difference between the MSRP and the invoice price suggests. This is why it's always a good idea to do your research and understand the various factors that can influence the final selling price of a vehicle.
How to find the MSRP on a new car
Finding the MSRP on a new car is relatively straightforward. Let’s take a look at some of the most common options:
- Dealer's website: Most dealerships list the MSRP on their website. It's usually included in the vehicle listing along with other information about the vehicle.
- Manufacturer's website: The manufacturer's website will also typically list the MSRP. You can usually find it in the specifications or pricing section for each vehicle model.
- Window sticker: The MSRP is also listed on the window sticker (also known as the Monroney sticker) of new vehicles. This sticker includes other information about the vehicle, such as its fuel economy and safety ratings.
Should I pay MSRP?
Whether or not you should pay the MSRP for a vehicle depends on several factors.
- Market conditions: In a buyer's market, where supply exceeds demand, you may be able to negotiate a price below the MSRP. In a seller's market, where demand exceeds supply, you may have to pay the MSRP or even higher.
- Vehicle popularity: If the vehicle is in high demand and in short supply, you may have to pay the MSRP or higher. If the vehicle is less popular or in abundant supply, you may be able to negotiate a lower price.
- Negotiation skills: Your ability to negotiate can also affect the price you pay. It's always a good idea to do your research and be prepared to negotiate to get the best deal.
The bottom line
MSRP is a key factor in the cost of a vehicle. It's the price that the manufacturer recommends dealerships sell a vehicle for, but the actual selling price can be negotiated. Understanding the MSRP and how it compares to the invoice price can help you negotiate a fair price when buying a vehicle. However, keep in mind that the actual cost of buying a vehicle may be higher than the MSRP due to taxes, registration fees and dealer fees.
