What is MSRP?
Manufacturer’s Suggested Retail Price
It is the price you see on the window sticker for a new vehicle. It is the suggested price that the manufacturer gives to the dealer to sell the vehicle. Traditionally, the MSRP has been the starting point for price negotiations between you and the salesperson.
What it’s not:
MSRP is not the cost the manufacturer paid to produce the car. It’s also not the cost the dealership paid for the car. Lastly, it is not necessarily what you will pay for the vehicle.
Items not included in the MSRP:
The MSRP may not include other expenses related to the vehicle including:
Destination Charge – This is the cost the dealership must pay the manufacturer for the delivery of the vehicle to the lot.
Dealer-Installed Options – Any options installed after the vehicle arrived at the dealership will not be reflected in the MSRP. In these cases, you will see an additional window sticker noting what these options are, the cost and the final cost of the vehicle.
Taxes, Fees and Registration – Sales tax, registration and title fees are also not included in the MSRP. These fees are mandated by the state, so there is no negotiating these costs down. These are typically added to the vehicle cost and are financed in the loan.
Dealership Fees – Dealerships may include other charges like document preparation fees, dealer preparation fees and advertising fees. These fees may be negotiated down.
Is Paying Above MSRP the New Normal?
Traditionally, MSRP has been the starting point for price negotiations between you and the salesperson. With vehicle shortages and low inventory, this is no longer the case. If a vehicle is in high demand or you are seeking a vehicle with a rare trim package, you may have to pay MSRP to get the vehicle you want. In these cases, it may be your best option to place an order for the vehicle. We also highly encourage you to find a reputable dealership that doesn’t charge more than MSRP, especially if you are ordering the vehicle.
The Future of Car Manufacturing and Buying?
Some industry experts speculate that manufacturers and dealerships may transition to “order-only production” – meaning that you must place an order for the vehicle you want and wait for it be produced. The supply chain and production disruptions caused by COVID-19 have demonstrated to auto manufacturers that they can produce fewer vehicles and sell them for a higher price, resulting in increased profits. This production model lessens your ability to negotiate and receive incentives from the manufacturer.
What is a Fair Price for a New Car?
A fair price will be different for each person moving forward. What purchase price makes sense for your situation, your family needs and your budget? Are you willing to pay MSRP or above MSRP?