Start car shopping, and one of the first numbers you'll see is the vehicle's MSRP, or manufacturer's suggested retail price. It’s found on the vehicle’s window sticker, in advertising, and on automakers’ websites. Sometimes called the sticker price or the retail price, a vehicle’s MSRP is one of the more misunderstood numbers presented to buyers – and often one of the most irrelevant.
The MSRP is precisely what it says it is. It's the price that an automaker suggests their franchised new car dealers try to sell a vehicle for. Vehicle manufacturers cannot legally dictate the amount that their cars, trucks, and SUVs are sold for at the retail level, as dealers are protected by strong franchise laws that give them substantial autonomy from the manufacturer. It’s not like the consumer electronics market, where companies like Apple and Sony put significant pressure on retailers to keep their pricing in line.
A car’s sticker price is not the same as its base price, invoice price or, in most cases, its selling price.
So, how can consumers use the MSRP in their car-buying odyssey? By understanding what it does and does not include, knowing the difference between MSRP and the invoice price, and understanding how to negotiate the cost of a new car, buyers can save thousands.
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What Does MSRP Include?
The MSRP of a new vehicle doesn't really tell you much beyond what the car, truck, or SUV's builder thinks the dealership should charge, and what you should pay. It includes the base price of the vehicle, plus the cost of any options and option packages. Sometimes it will reflect option package discounts, which are price reductions if you buy options as a group, rather than a la carte.
A car's base price is its price without options. Sometimes you'll see it listed as the price of the lowest trim level available, while in other cases you'll see a base price for each trim level before any additional options are added.
You’ll find the MSRP displayed on the vehicle’s window sticker. Called the “Monroney” sticker, after a U.S. Senator who sponsored consumer legislation mandating its use on new cars by automakers and dealerships, the window sticker tells you about more than just the vehicle price. You can find out more in our story on things you can learn from a car’s Monroney Sticker.
What Doesn’t MSRP Include?
A car's sticker price does not include many other costs you'll have to pay if you want the car. First, the sticker price doesn't include the vehicle's destination charge. That's a cost an automaker charges the dealer to ship the car from the factory to the new car lot. While many elements of a car-buying transaction are negotiable, the freight charge typically isn’t.
Any factory-installed equipment will be included in the sticker price, but any dealer-installed options will not be shown on the Monroney sticker as part of the MSRP.
The MSRP also does not include taxes, fees, and registration costs. They differ by the state you live in, and you should include them in your math when you’re figuring the total take-home price of the vehicle. Like the destination charge, shoppers can’t haggle over these mandated fees.
Many dealerships charge other fees, such as fees for preparing the sales documents (often called doc, or documentation fees), advertising fees, and dealer prep. Those dealer fees are also not part of the MSRP, but most can be negotiated. Add-ons you’ll be offered during the buying process, such as extended warranty, VIN etching, paint protection, and others are not included in the MSRP.
How Is the MSRP Different Than Invoice Price?
While the MSRP is what the automaker wants the car dealership to sell the vehicle for, the invoice price is theoretically the price the dealer pays to the manufacturer for the vehicle they are selling. We say theoretically because it is not always – or even often – the price dealers actually pay. Dealers typically receive discounts (called dealer holdbacks) plus dealer incentive bonuses when they meet sales goals or hit other benchmarks, such as high scores on sales satisfaction surveys. Those discounts effectively lower the price they pay for inventory.
While many internet sources will estimate invoice prices, few can accurately determine the actual cost a dealer paid for a particular car. In fact, two dealers could pay significantly different effective prices for identical vehicles. While some car dealerships will show you the invoice, you'll likely never see the discounts they received that effectively lower the invoice cost. You can learn more by reading our article on what is the dealer invoice price?
Why Is the MSRP Important?
A car’s MSRP gives shoppers a benchmark they can use when they start their car-buying process and begin to compare different models. You’ll see each car, truck, and SUV’s MSRP listed in our new car ranking and reviews.
The sticker will often be the starting point in your price negotiation at the car dealership. Most professional salespeople with try to keep the focus on the MSRP and the monthly payment in the deals they propose.
Why It Isn’t Important
As a buyer, the sticker price isn’t that important to your negotiations. While the monthly payment has to fit in your budget, using it as a benchmark in the deal can cost your thousands of dollars over the course of your car loan. Other factors are much more important in setting the price you pay than looking at what the automaker thinks the car should sell for.
Read our article on negotiating the price of a new car to learn more.
Supply and Demand
When a car is brand new and in high demand from enthusiasts, you'll invariably find dealers charging higher than sticker prices. In many cases, the price will come down as soon as the initial buzz is off the vehicle. The exception is for limited edition vehicles, such as the 30th Anniversary Mazda MX-5 Miata, which are available in such small quantities that they may never come down as far as MSRP.
On the flip side are cars that shoppers just aren’t buying. In those cases, you can expect to negotiate a price well below the MSRP. In some cases, you’ll even be able to get a price that’s below the dealer’s invoice price. You’ll find buying insights at the bottom of many of our new car reviews that will help you identify cars that are selling particularly well or struggling in the marketplace.
When cars aren't selling at the pace automakers expect, or a new model is on the way, automakers offer special purchase incentives to pick up the sales pace. Two of the most common types of incentives are cash back deals and low-interest financing offers. Cash rebate deals lower the effective price of the car, while low- or no-interest financing deals reduce the amount of interest you’ll be charged on your auto loan.
Some salespeople may tell you that you have to pay MSRP to qualify for an incentive from a manufacturer. In most cases, that simply is not true. While you shouldn’t have to haggle to get the automaker-sponsored deal, you should negotiate to get even more off the price of the car.
You’ll find the best new vehicle buying incentives available on our new car deals page.
What Is an Addendum Sticker
In some dealer showrooms, you’ll see a smaller sticker alongside the Monroney window sticker. It will list one or more add-ons and a new sticker price. It’s called an addendum sticker, and it’s likely to include any dealer installed accessories, add-on products, fees, and a “market adjustment fee” or “additional dealer markup.”
Are those costs real, and should you consider them to be a part of the retail price? Generally, all of those prices are negotiable, especially the prices of the add-ons and additional dealer markup. Many smart shoppers ignore the addendum sticker altogether, and work to negotiate a price lower than the suggested retail price on the Monroney sticker itself.
In some cases, the additional dealer markup is just a tactic to try to move the salesperson’s opening offer higher. Unless the car is in super-short supply, there’s usually no reason to start the negotiations above sticker. If you see add-ons, such as an alarm system, included on the addendum as if they're a done deal, request they are removed, or you are offered another car without the extra items.
How Much Should You Pay for a New Car?
Of course, the dealer is entitled to make a fair profit on the car, as long as they act professionally, ethically, and legally. As a buyer, you're entitled to the lowest price you can negotiate. It's important to remember it is a business transaction, and you are best served by keeping your emotions in check. You have the ultimate tool in the car-buying process – you can always walk away and seek a better purchase price elsewhere.
There’s no good rule of thumb to say how much you should pay below MSRP or in relation to the invoice. One good way to find out what kind of deal you can get is to shop at multiple dealerships by working with their online sales managers, so you don't have to drive across town. Another option is the U.S. News Best Price Program, which can connect you with local dealers offering pre-negotiated prices. Buyers save an average of more than $3,000 off MSRP when they use the program.
Use the U.S. News Best Price Program to find the best local prices on your next car.
You Can Pay More Than MSRP and Not Realize It
You might be thinking “I’ll never be paying anywhere near MSRP.” Fact is, it’s pretty easy for shoppers to do so if they approach the car-buying process the wrong way. Here are a few ways it can happen:
Don't Focus on the Monthly Payment
A good salesperson will want your attention focused on the monthly payment, rather than the purchase price of the car. When they do so, it's easy to manipulate all of the other numbers in the transaction to make it look like you're getting a great deal, while you're actually paying more in the long run. By stretching out the length of the loan, for example, they can fit the payment for a full MSRP purchase price into an affordable monthly payment. However, because you'll be paying for an extra year or two (and probably paying a higher interest rate), you'll end up paying thousands more for the car than you should have.
You can avoid this by using a car payment calculator to find the total cost of the loan, which is the monthly payment multiplied by the number of months in the loan. You then add that total to your down payment and the value of your trade-in to find the total price of the car over the full term of the financing.
Bring a Pre-Approved Financing Deal
Many buyers are happy to let dealerships work out a financing package for them, but that’s a potentially costly way to do things. A better plan is to get a pre-approved auto loan from a bank, credit union, or other financial institution before you get near a car dealer. U.S. News partner myAutoloan can find you as many as four car financing offers in minutes with one simple online loan application.
Dealers make a substantial part of their revenue by marking-up the interest rate or loan fee on financing deals they arrange for consumers. In most states, they are not required to disclose how much markup there is. Any markup they charge effectively raises the price of the car closer to MSRP.
When you arrive with a pre-approved loan deal from an outside lender, they have a benchmark to beat. If they can’t, you can complete the financing with your original lender.
Know the Value of Your Trade-In
If you don't know the value of your trade-in, you're inviting the dealership to charge you the full retail price for your new car without you realizing it. They'll simply low-ball the value of your trade, and show you a great price on your new vehicle. Offering you just $10,000, for example, on a car that has a trade-in value of $12,000 gives them an extra $2,000 to work with in the negotiation. They can then show you a car price that appears to be $2,000 below sticker price, while effectively making the same amount they would have with a fair trade-in value and a full-sticker sale. You drive away thinking of the great deal, which you didn’t really get.
Don't Buy Costly Add-Ons
One of the last stops at the dealership is in the finance office, where you’ll sign the paperwork for the purchase of your new car and any financing you’ve arranged through them. Along the way, you’ll probably be offered add-on products and services ranging from extended warranties to nitrogen in your tires.
With many of these pricey add-ons, there’s a big difference between the dealer cost and the retail price. If you opt to buy them at the dealer, you may as well have paid full sticker price for the car, as the profit the dealer earns is substantial.
Before you consider buying any add-ons through the dealership, it’s a good idea to research the products and the companies behind them. Many of the products and services are available outside of the dealership at lower prices. Even extended warranties are available from many lenders and auto insurance companies.
Read our article on expensive automotive add-ons to learn more.
MSRP and Leasing
You might wonder if you have to worry about the manufacturer’s suggested retail price if you plan to lease, rather than purchase a new vehicle. The answer is an emphatic yes. The price you pay for a lease is the difference between the capitalized cost and the expected value at the end of the lease term (the residual price). There are three ways to reduce the cost of a lease: choose a car with a high lease residual, get a contract with a low money factor (interest rate), or negotiate the lowest capitalized cost (sales price).
Of the three factors, negotiating the best new car price you can is the easiest way to reduce your monthly payments, the amount due at signing, or both. While some dealers may lead you to believe that you can't negotiate the price of a lease, you certainly can, and should, negotiate the sales price.
More Shopping Tools From U.S. News & World Report
A rule we follow at U.S. News & World Report is that you are not getting a good deal unless you are getting a good car. Our new car rankings and reviews look at the factors car buyers tell us are critical in their buying decisions. We used the consensus opinion of the nation’s top automotive journalists, blended with quantitative data on safety and predicted reliability to rank nearly every car, truck, minivan, and SUV you can buy today.
Our expert journalists constantly track the best new car financing and cash back offers from manufacturers. Whether you’re looking for a Toyota hybrid or a Mercedes-Benz convertible, you’ll probably find an up-to-date offer on our new car deals page.
The U.S. News Best Price Program can save you even more by connecting you to local dealers offering pre-negotiated prices. Our partners at myAutoloan can save you money on your new or used car financing by finding up to four offers with just one online application.