The Invoice Price
The MSRP Price is short for “Manufacturers Suggested Retail Price.” It comes from laws that were passed to protect small businesses and consumers alike. Before the MSRP, car dealers were free to charge whatever they wanted for cars. So when you – the consumer – walked into a dealership, you had no idea what the car you wanted was truly worth.
So obviously if you don’t know what a car really costs, you have no idea at what price to start negotiating with the dealer for the car you want.
But where is the MSRP price? It’s the actual sticker price! But let’s go over some car dealer terms to clarify things a bit:
The MSRP price is equal to the sticker price. The Invoice cost is what the dealer paid to the manufacturer for the car. The Holdback refers to Factory to Dealer Rebates. A good tip: Start your negotiations at around $2000 below the invoice price.
In the past, dealers put the MSRP price of each car in large letters on the windshields. This was done to advertise to passing traffic. But this has been mostly replaced with a spec sheet on the side windows that also lists the MSRP.
One tactic dealerships use is to leave off the MSRP price from the spec sheet on cars that are in high demand. They do this in the hopes of negotiating the highest price possible for those cars. Because if they DID post the MSRP price, potential customers may immediately expect to pay less than the dealers know that the market will bear.
So if a potential customer does ask for the MSRP price, the dealer can now talk about it while hawking various “extras” that the car has. In this way the car salesman can buffalo you into negotiating from a higher starting price.
The MSRP price is not the final price of the car to you. The MSRP does not include taxes, registration, destination charges, and other various fees – all of which often bring the final price of the car higher than the MSRP price. But most folks expect to get a discount off of the MSRP, so dealerships used to inflate the MSRP in order to give you a “discount” and fool you into thinking you were getting a great deal.
Lately, however, most dealerships have set the MSRP close to the actual market value. So when you do add in all the extra fees like the destination charge (which, by the way is non-negotiable), your final cost for the car will often exceed the MSRP price.
So the MSRP is actually a good thing. With today’s MSRP, all dealerships and customers start off with the same set prices and negotiate from there. The MSRP price does not eliminate free trade, but tries to put everybody on an even playing field.
Before you spend your hard-earned money on a new car, discover these money-saving tips on the MSRP price. Know your rights and options!
