Manufacturer’s Suggested Retail Price (MSRP) is a word commonly thrown around at car dealerships, but it can create some confusion about what you’re paying for.
Let’s dive into what MSRP means, why it’s important when looking at the price of a new car and how to take this knowledge to the showroom floor and get what you want.
What Does MSRP Mean?
The MSRP is the manufacturer’s recommended selling price of a vehicle. It’s established so the dealer and manufacturer can make a profit on the sale.
All vehicle models will have the same MSRP across all car dealerships since it’s the manufacturer’s suggested price. It’s a starting price dealers use to determine how much to sell the car for.
Knowing what MSRP is and how it works will help you plan and calculate your monthly auto payments. It will also help you during the car buying process.
What is included in MSRP
MSRP lists the basic features of a car, excluding upgrades, optional extras and all the taxes, fees and other costs of buying a car. Those things get added on to the final price.
It also includes the standard factory warranty and services. The MSRP is not always the final sales price; the dealer will determine it based on demand and how much they think they can markup the price.
You can find the MSRP on the car’s window sticker along with the vehicle’s features. You can also find it on the manufacturer’s website.
What’s not included in MSRP
The MSRP is a starting point for dealers. It only covers the basics and may not include special configurations or features (sometimes referred to as the car’s trim level). So if you want high-end speakers, a moonroof or leather seats, expect to pay more than the MSRP. It also doesn’t include any dealer services or fees
Before talking to a dealer, be aware there are other important fees and charges excluded from the selling price
- Destination charge: The manufacturer charges this fee for delivering the vehicle to the dealership. Dealers are usually reluctant to negotiate on this because it’s money out of their pocket.
- Registration fees: These fees are charged after the purchase of the vehicle and vary by state. Again, they aren’t negotiable.
- Dealer fees: There are other fees – like documentation, GAP insurance, advertising fees, VIN etching and others – a dealer will add to the purchase price of a vehicle. The good news is that some of these may be negotiable.
However, a dealer may also offer incentives, like manufacturer rebates or cash back at purchase. When all of these are added to the MSRP, you get the sticker price or the price the dealer publicly advertises.
MSRP vs. Base Price vs. Invoice Price: What’s the Difference?
You might be wondering why there are so many pricing points. What’s with all these labels?
The MSRP is suggested and not required. Because of this, dealers can decide what profit margin they want to take on the car, because they already paid for it.
Here’s a breakdown to help you suss out the jargon.
- Invoice price: This is what the dealer actually paid for the car.
- Base price: This is the cost for building the car without any added features like cameras or cruise control. It’s like the starting point for the sale.
Essentially, knowing what the MSRP is versus the dealer price will help you negotiate while car shopping.
Can I Negotiate Off MSRP?
Knowing is half the battle. You can use this new knowledge to help with negotiating a fair price from the dealer.
It will also help you negotiate which features you want to add on and for what price.
Here are some tips to get you started:
- Start negotiations below the MSRP and work your way up.
- Shop around before signing anything.
- Ask to see the invoice price.
- Research on sites like Kelly Blue Book or Edmunds to find out what others paid for the same car in your area.
Knowing How the MSRP is Made Can Help You Negotiate
When it comes to buying a car, it’s important to know what went into creating the price.
We all want the added features. But since they’re not included in the MSRP, expect to pay some extra fees.
Most of all knowing what and how it works gives you more leverage when going to the dealership to get a fair price.
The Short Version
- The MSRP is the manufacturer’s recommended selling price of a vehicle. It’s established so the dealer and manufacturer can make a profit on the sale
- MSRP lists the basic features of a car, excluding upgrades, optional extras and all the taxes, fees and other costs of buying a car
- Essentially, knowing what the MSRP is versus the dealer price will help you negotiate while car shopping