Understanding the Difference between Market Value Selling Price & MSRP
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When you decide it's time for a new-to-you vehicle, the shopping process can be a lot of fun.
Like studying the menu at your favorite restaurant, you sift through different cars before choosing the one that suits your tastes.
Then, after making your choice, it's time to work through the financial realities of completing the transaction. Among those is the final price and whether or not you pay full MSRP or receive a discount.
While new vehicles roll off the assembly line with sticker prices pasted to their windows, car buyers don't always pay the listed MSRP.
What does MSRP mean? What is the car invoice price?
Let's look at the difference between true market value pricing and MSRP and the factors affecting both.
What does MSRP mean?
Every new vehicle comes with a manufacturer's suggested retail price, also known as the MSRP or sticker price.
The sticker on a new car lists the make, model, options, parts content, and location of manufacture, along with the suggested price.
The MSRP is the recommended selling price of the vehicle, although it's not always what consumers pay.
Different promotions like cash rebates or dealer incentives, market conditions, and new vehicle introductions all affect whether or not someone pays full MSRP or a reduced sale price.
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What is the car invoice price?
The car invoice price is what the seller pays the automaker for the vehicle. When a seller moves a car for more than the invoice price, it provides them with a profit margin.
The invoice cost consists of the car's base price and expenses paid by the manufacturer, like advertising.
Knowing a vehicle's invoice price can help guide you on how much of a discount you might obtain. Usually, the final purchase price is somewhere between the invoice cost and MSRP.
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MSRP vs. invoice price
When you zero in on a particular vehicle, it may be confusing to know whether you'll pay the full sticker price or something closer to the invoice cost.
A more accurate estimate is the market value, which is what buyers in your area pay for a specific car.
This figure considers several factors, like the popularity of a particular vehicle, the time of year, and selected options.
For instance, if you're in the market for a newly released model that buyers are flocking to purchase, you probably won't receive a discount off of MSRP. And the seller might even add a market adjustment to a particularly desirable vehicle, further increasing its cost.
Or, if you live in an area with a wintery climate and are shopping for an all-wheel-drive sedan in high demand, odds are there won't be much room for a price reduction.
On the other hand, a make and model that's been in production for many years, with waning consumer interest, may offer you the opportunity to save big.
Different times of the year also offer better opportunities for savings, with the end of the calendar year and various holidays featuring numerous promotions.
Something else to remember is the difference between the invoice cost and MSRP varies depending on the vehicle type and total car price.
An economical vehicle with a low sticker price and few options probably slightly differs between the invoice and MSRP figures. This small disparity means you won't be able to ask for much off before you sign the papers.
However, luxury cars could have a more significant difference between the MSRP and invoice cost, and you might be able to obtain an excellent deal, saving yourself thousands of dollars.
2017 Lexus ES 350 (from $31,950)
Additional information on MRSP and car invoice price
Although a customer often references the dealer invoice price when trying to secure some money off the sticker, it isn't always what the dealer pays.
The dealer cost is the actual number they pay for a vehicle, giving you a better starting point when trying to convince them to deduct some money from MSRP.
And performing online research ahead of time informs you of current car pricing, so you can better know whether you'll pay the total sticker price or be able to obtain a price reduction.
Occasionally, a seller installs add-ons like wheel locks or paint protection, adding those costs on top of the new car price. Sellers place a separate sticker next to the MSRP listing these additions and refer to them as supplemental stickers or addendums.
What does MSRP mean in summary
Although the MSRP on a new vehicle may seem to indicate its actual selling price, that isn't always the case.
The market value of a car provides better guidance on what you can expect to pay when you sign the papers.
And although the invoice price on a new vehicle is typically used as a baseline when you try to score a deal, the dealer cost is what the seller actually pays for the car.
Shopping for a new-to-you vehicle can be fun, but sometimes it's a hassle. Driving around to various sellers, browsing inventory, and taking test drives can be time-consuming. Even after all of that time spent, you might not find the car you want. What if you’ve been in an accident, your vehicle got totaled, and you want a quick and simple buying experience? Shift makes finding your next car easy. You can buy any of Shift's cars directly online from the comfort of your home, knowing it has no hidden issues because all Shift vehicles pass a 150-point inspection and get a fair, up-front price from the get-go.
2015 MINI Cooper S (from $19,950)
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All prices are based on vehicle availability and pricing as of
April 15, 2022
Pricing shown is not guaranteed and does not include taxes or other product fees.