There can be a significant difference in a car's sticker price and its MSRP, or manufacturer's suggested retail price. So, exactly how do these numbers differ and what exactly do they mean?
MSRP is the price manufacturers suggest that dealers charge for the vehicle you are looking to buy. Factors that influence this price are the cost of manufacturing, the make and model, the specific trim options and where the car is being sold. Vehicles that are more popular in one region of the country will have a higher MRSP than those sold elsewhere. The MSRP is determined ahead of time by the auto manufacturer and it is only a suggested price, a guideline as to where dealers should base their starting asking price. By law all new cars for sale are required to list the MSRP on the sticker in the window. In fact only the purchaser of a new car is allowed to remove the sticker.
The sticker price is what the dealership lists as the price you see the car for sale for. This price includes additional charges such as transportation (sometimes called a destination charge), preparations costs and dealer or after market installed options. These additional charges are not part of the initial MSRP but are part of the final cost of the vehicle. Since the MSRP is a suggested price, the dealer is free to charge whatever he wants for the vehicle. Because a lot of customers say they won't pay above sticker price, manufacturers and dealers sometimes raise the sticker price artificially and then offer supposed discounts. Some cars may become so popular that dealers can charge, and sell, for far more than the MSRP. The dealer may add on something called a fair market value adjustment when a particular model is in short supply because of increased demand. Dealers add an amount they feel is appropriate to increase their profit. While you may be able to negotiate away the fair market value adjustment, many times you can't for cars that are in short supply. This is because the dealer knows that even if you don't buy the car--somebody else will pay a higher price.
It is important to understand that the MSRP and sticker price are different than the invoice price.
The dealer invoice price is the amount the manufacturer charges all new car dealers for an identical make and model new car or truck. The manufacture sets the price for the base configuration of any new car or truck, and then determines the amount of money that each additional accessory or add-on adds to the cost. Common types of options that increase the dealer invoice price are an automatic transmission, air conditioning, premium sound systems, a sunroof or two-tone paint job.
While the dealer invoice price is the amount that the dealer pays the manufacturer for the car, it is often not the actual price the dealer pays for the vehicle. Manufacturers offer dealers incentives in the form of rebates and holdbacks that lower the overall investment in a new car or truck. Most of the time, dealer incentives and holdbacks result in a dealer actually paying 1 to 3 percent less than the invoice price of the vehicle.
Why Choose Consumer Reports?
There are many places where one can find car prices. Consumer Reports' new car price service is one of the most popular places for finding new car prices. You can get new car reports from several sources, but Consumer Reports is one of the most respected sources. One reason is that neither the magazine itself nor the new car reporting service takes any money from advertisers. This is an appeal to those who are searching for an objective way to discover the baseline for a car, and determine a good price for the vehicle they want.
What Does My Report Include?
Consumer Reports' New Car price service gives you a great deal of information so you can make an intelligent decision. You will find a "bottom line price," which is the price that allows for any dealer incentives or rebates the customer may get, a list of the included standard equipment on a car, and all the optional features available for that car. You'll see just how much those options should cost.
You'll also find recommendations for the equipment options that are best for safety and comfort for that particular model, as well as some suggestions for other cars that might fit your needs.
Where Else Can I Look?
For actual prices on cars in your area, you can also look here at CarsDirect. Compare Consumer Reports' suggested models with actual prices available, and see what car and price will be the best for you.
Related Questions and Answers
Will a New Car Sticker Price Vary Between Dealerships?
New car sticker price is usually what is commonly referred to as MSRP, or Manufacturer's Suggested Retail Price. This price is determined by the factory, based upon what it costs them to produce the vehicle, and what they feel the consumer would be willing to spend. Since MSRP is determined by the factory and not the individual dealership. This price shouldn't vary from dealer to dealer. When you're looking for a new car, you should ask what the dealer invoice price is, because it is what the dealer paid for it.
What Exactly are Auto Dealer Incentives?
When talking about auto dealer incentives on new cars, many people that work in commission-based sales would call them 'spiffs'. These are usually regionally based discounts or rebates given by the factory to the dealers on specific cars. These dealer incentives are designed to help drive dealer purchases of specific car models and aren't aimed at the consumer. However, a dealer that can buy a car for less is going to be able to sell that car for less and still make money on the sale. When you're out searching for a new car, it's important to know that "dealer invoice" isn't the "end all, be all" as far as what the dealer actually pays. You should ask to see the invoice during your sales negotiations.