When shopping for a new car, you’ve likely come across the term ‘MSRP’ when looking at prices. But what exactly does MSRP mean? The ticket price that dealerships advertise is based on the MSRP, which stands for Manufacturer’s Suggested Retail Price. This is the price that the manufacturer recommends a dealership sell a car for. Let’s go into more detail about MSRP, how it’s determined, and how it impacts the car-buying process.
Key Points:
- MSRP stands for Manufacturer’s Suggested Retail Price.
- MSRP represents the price that the manufacturer recommends a dealership sell a vehicle for.
- Car buyers can negotiate the price of a car and don’t necessarily have to pay the MSRP.
- MSRP includes the base price and standard features, but excludes the sales tax, added features, and dealership fees.
What Is MSRP?
MSRP is short for Manufacturer’s Suggested Retail Price, which is the price that carmakers suggest dealers charge for a specific vehicle make and model. Essentially, the MSRP serves as a benchmark for vehicle pricing.
The MSRP is helpful to car buyers since it factors in the specific retail value of the automobile, though it does not necessarily mean that is what the dealership will charge you. Instead, you can use the MSRP as a starting point to determine how much to pay for a car.
Learn more: How Much Car Can I Realistically Afford?
MSRP Vs Base Price
A vehicle’s base price is the manufacturer’s suggested price that dealers should charge for the base model. That means higher-tier versions of a car model with additional features will be more expensive. In other words, the MSRP of a vehicle model with a higher-end trim would include the base price plus the cost of the additional features.
MSRP Vs All-In Pricing
As mentioned, MSRP is the price that the manufacturer recommends a dealer sell the vehicle for. MSRP includes the vehicle’s base price and any additional features or packages, though it excludes taxes, fees, and other additional costs.
All-in pricing, on the other hand, refers to the total cost of the vehicle, including the MSRP, sales tax, destination charges, registration fees, dealership fees, and any other costs added to the price. In other words, “all-in” pricing refers to the final out-the-door price that car buyers pay. It provides an accurate picture of the actual amount you’ll pay for the vehicle.
In some provinces — including Ontario, Alberta, Quebec, Manitoba, and Saskatchewan — all-in-pricing is the law. Auto dealerships in these provinces are mandated by law to advertise the full cost of a vehicle when selling to car buyers. This is helpful to consumers because it prevents any hidden fees that some dealers may charge.
Do Retailers Change The MSRP?
Yes, car dealers can charge a price that’s slightly different than the MSRP. Different than a sticker price, MSRP is merely a suggestion from the manufacturer. The rest falls to supply and demand, fluctuating with the state of the market.
The sticker price can vary between dealerships. This enables market competition and allows multiple dealerships to profit, preventing a monopoly in the market.
However, while the price differs, it will usually be within a reasonable range of the actual MSRP. It is an end-consumer recommendation that does not impact what the dealership pays at cost. As a result, you can often find prices that are lower (and also those that are higher).
What Is Included In The MSRP?
The MSRP includes the following:
- Base price
- Standard equipment
- Manufacturer’s factory warranty
- Destination charge
What Costs Aren’t Included In The MSRP?
MSRP does not include any of the following:
- Dealership fees
- Additional options
- Sales taxes
- Vehicle registration
- Extended warranties
- Aftermarket accessories
- Incentives
Ultimately, the MSRP is only the base price of the vehicle with basic features, and does not include the final price you will pay that would include all other add-ons.
Price-Related Terms To Understand When Buying A Car
When it comes to purchasing a car, there are countless acronyms and terms that you’ll come across, especially when it comes to the price of the car. Most of these terms are confusing and only make sense to those in the auto industry. Let’s take a look at all the terms you might hear when shopping for your next vehicle.
Sticker Price
This refers to the advertised listing price of the vehicle at the specific dealership. In other words, it’s the price tag you’ll see on a car.
While the sticker price will likely be within the range of the MSRP, it is not often the same. This differential leaves you room to negotiate a better rate. Depending on the special features of the car and any current marketing pushes, the amount could be either lower or higher.
Invoice Price
The invoice price is what the dealership pays for the vehicle from the manufacturer. It typically includes manufacturer fees and destination charges and is generally lower than the MSRP. For the dealer to profit from the sale of the vehicle, the sale price must be higher than the invoice price.
Sale Price
The sale price is the price you ultimately pay for the vehicle. In almost all cases, it is somewhat different than the MSRP, the sticker, and the invoice price.
Registration Fees
Varying based on location, registration fees reflect the cost to legally own the vehicle and operate it. These costs are different from insurance and extended warranty prices.
Base Price
The base price is the price for the most basic version of a vehicle model with no additions, and is often similar to the MSRP. This price provides a sense of the minimum amount you’ll pay for the vehicle.
Destination Charge
The destination fee covers the cost of transporting the vehicle from the manufacturer to the dealership. It is added to the vehicle’s price and is typically non-negotiable.
Payment Price
This is the amount that you’re responsible for paying if you take out a car loan to finance your vehicle purchase. Payment schedules can vary from weekly, bi-weekly, semi-monthly, and monthly payments, with the latter being the most common. The amount of your monthly payment is proportionate to the size of the loan, term length, interest rate, and down payment.
Where Can You Find the MSRP On A Car?
The MSRP is typically found in the following locations:
- Vehicle Window: The MSRP is typically displayed on the vehicle’s window sticker.
- Manufacturer’s Website: Carmakers like Honda, Ford, Toyota, and Nissan list the MSRP for their models on their websites.
- Dealership’s Website: Individual car dealerships also advertise MSRPs for their model on their websites.
- Online Research Platforms: Websites such as Canadian Black Book and Edmunds may list MSRP information about specific vehicle makes and models.
- Contacting The Dealership: You can also call the dealership directly to find out the MSRP of a specific model.
Can You Negotiate The MSRP?
Yes, you can negotiate the price of a vehicle and don’t necessarily have to pay the advertised MSRP. To successfully negotiate the MSRP, consider the following tips:
- Do Your Research: Understand the vehicle’s market value by checking online resources and comparing prices. You can use sources like Canadian Black Book and Auto Trader to help you get started. This can give you a sound understanding of what prices are like.
- Look Into Dealer Incentives: Find out about dealer promotions, incentives, or rebates currently available, which can provide you with some leverage when negotiating.
- Set A Budget: Determine the maximum amount you want to pay for a car and stick to it. This can help you avoid spending more than you can afford.
- Be Prepared To Walk Away: If the dealer won’t budge on price, don’t be afraid to walk away. There will always be another vehicle to negotiate a price on.
- Negotiate Extras Separately: First negotiate the price of the vehicle itself, then negotiate any add-ons to ensure you get the best price on the vehicle itself.
- Get Pre-Approved: Look into different financing options and get pre-approved for a car loan. This will not only give you an idea of how much you can borrow, but it will also show dealers that you’re a qualified buyer.
- Get A Cost Breakdown: Ask the dealership for a detailed breakdown of all costs involved in the final price, including taxes and fees. This will help you spot any hidden fees and understand the actual out-the-door cost of the vehicle.
Learn more: How To Negotiate A New Car Price
Does MSRP Apply To Used Vehicles?
MSRP is more typically applied to new cars, and not so much on used ones. That’s because a used vehicle has already depreciated to some degree. As such, the MSRP is no longer applicable to the current value of the car.
When it comes to used cars, other factors are assessed to determine the vehicle’s value and ultimate sale price, including its age, condition, mileage, options, and market demand. That said, the original MSRP for the model in question may give you an idea of what the car was originally worth brand new.
Learn more: Can You Reduce Vehicle Depreciation?
Is The MSRP A Good Price?
The MSRP can be a helpful starting point when it comes to determining what to pay for a vehicle. However, it may not always be the best price to pay. Dealerships often offer incentives, deals, discounts, or promotions that can reduce the final vehicle price under the MSRP. Not only that, but you may also be able to negotiate a lower price with the dealership.
To be sure that you are getting a fair point, gather all the information you can about the vehicle. Investigate the MSRP, the value of each add-on, and its position on the market. All of these factors taken together will give you real numbers that you can contrast against the price you are paying.
Usually, the MSRP is a fair cost for a base model. However, that doesn’t mean you can’t negotiate for an add-on like a remote start.
How Much Can You Negotiate Off The MSRP?
It’s common to aim for within 3% to 5% of the invoice price, though the actual price reduction depends on things like dealership incentives, the vehicle’s demand, and your ability to negotiate.
Do your research ahead of time to get a full picture of the vehicle. By using real numbers to communicate with the salesperson, you put yourself in a better position for negotiation.
Final Thoughts
Now that you’re familiar with what an MSRP is, you can put yourself in a better negotiating position. Simply because the MSRP is recommended doesn’t mean that is the amount you have to pay. It does, however, provide you with an industry-standard, and access to real numbers that are objectively supplied. Provided you use the MSRP as a starting point for your sales price negotiation, you’re off to a great start.
