It’s the most frequently cited number when you’re buying a new car, but it’s also one of the most misunderstood. It goes by many names – MSRP, sticker price, retail price – but the manufacturer's suggested retail price is exactly what it says. It is the amount that a car manufacturer suggests its dealers sell a vehicle for, including options. It does not include destination (freight) charges that typically add about $1,000 to the total price shown on the window sticker.
The MSRP is just a suggestion because automakers cannot tell dealers what price they must charge for their products. Unlike the consumer electronics market, where companies like Apple can pressure retailers to sell iPhones for the same price everywhere, car dealerships have more leeway because strong franchise laws allow them to operate with considerable autonomy.
Dealers use supply and demand to set the price they will sell a car for. If a car is in high demand, you might find them charging thousands or tens of thousands of dollars over MSRP. Sometimes such a “market adjustment” will be disclosed on an addendum placed next to the Monroney sticker on the car’s window, while other times you won’t find out about it until you start to negotiate.
New car salespeople will want to keep you focused on the MSRP, but for buyers, it's one of the least important numbers you should consider. It's just a good jumping off point for price negotiations.
You can find a more realistic number by looking at our Best Price Program, where local dealers show the guaranteed savings that they are willing to offer on an individual car. Consumers save an average of $3,279 off MSRP when they use the program.
Lease customers should be aware of MSRP as well, as the car’s residual balance will be a percentage of MSRP. You still don’t want to have payments based on full MSRP, as your monthly lease costs are based on the difference of your negotiated price and the residual value.
Manufacturer's suggested retail price is not the same as "base price," which is the retail price but does not include options or accessories. A vehicle’s invoice price is also different than MSRP, as it reflects how much a dealer paid the manufacturer for the car.