Car Pricing

For many consumers, dealing with car pricing can be one of the most daunting aspects of the vehicle buying experience. Understanding a few of the many factors that contribute to the price of an automobile may help make the process of purchasing or leasing a car a little easier.

MSRP (Manufacturer’s Suggested Retail Price)

One of the most commonly heard phrases related to car pricing is MSRP, or manufacturer’s suggested retail price. Often known as the “sticker price,” MSRP refers to the recommended amount that a manufacturer thinks a dealer should charge for a particular vehicle make and model. MSRP was designed to help create a standard for prices among various retailers. It is also meant to indicate the price of a car before fees for taxes, shipping and registration are applied. MSRP usually excludes add-on features such as moon or sunroofs and certain stereo components. An important point to remember is that dealers do not have to sell a car for the suggested retail price. New or popular vehicles in particular may sometimes sell for well over the MSRP.

Invoice Pricing

Another key term related to car pricing is invoice pricing. Generally, this refers to the wholesale amount paid by a dealer to buy a vehicle from a manufacturer. This price is typically the same for dealers throughout the country, and may be viewable to consumers at many car manufacturer’s websites. The invoice price is often used by the dealer to help negotiate a vehicle’s final price. One common sales strategy is for dealerships to advertise their cars as selling at or below invoice price.

While these are just two important concepts related to car pricing, understanding what MSRP and invoice pricing are and how car dealers use them may help when it comes time to visit your local showroom.

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