What does MSRP mean?
MSRP or Manufacturer’s Suggested Retail Price is exactly what the name says it is.
It's the price a car manufacturer suggests for a new vehicle across their franchised car dealers.
Vehicle manufacturers cannot dictate the price to be offered for their vehicles at the retail level, because dealerships are covered by strict franchise laws that give them considerable distributor control.
The MSRP has been designed to keep prices from dealer to dealer at the same level.
This was developed to help standardize the price of automobiles (and other products) throughout a manufacturer’s store across locations.
However, it is not a rigid price and varies by state and federal laws, economic conditions, and seasons.
MSRP is used frequently in the automotive industry.
Legally, car dealerships have to show the price on a sticker in the windshield of the car or on a spec sheet.
Buyers can use this offer as a starting point for negotiations before they settle at a fair price for the car.
A new vehicle's MSRP doesn't really offer you much more than what the manufacturer of the automobile feels the retailer will charge.
It includes the vehicle's base price, plus any add-ons, and packaging costs.
The base price of a car is its price without any additions.
Sometimes you will see it listed as the price of the lowest available trim level while in other cases you will see a base price for each trim level before adding any additional options.
Another thing: MSRP doesn’t dictate that dealers have to stick to the price.
Based on what the market will bear, car dealers will often sell new vehicles for less or more than MSRP. The dealer may mark prices up in a tight market with a popular vehicle just because they can or eventually lower it in case of a sluggish economy.
Things That Aren’t a Part of MSRP
The sticker price (MSRP) for a vehicle doesn't include many other things that you'll have to spend if you want to buy it.
First, the sticker price does not include the destination charge for the vehicle.
That's a cost an automaker is charging the dealer for shipping the car from the factory to the new destination.
While many elements of a car-buying transaction are negotiable, typically the freight charge is not.
Second, MSRP includes factory-installed equipment costs, but if you opt for additional equipment or upgrades for your new ride, it isn’t covered under MSRP.
Also, the MSRP does not include registration charges, taxes, and other fees.
They differ by the state in which you live, hence, when you determine the vehicle's total purchase price, you should include them in your calculations.
You can't haggle over these mandated charges, just like the destination charge.
The Importance of MSRP
MSRP isn’t a rigid figure, just a suggested price for consistency across dealerships.
That means customers can further negotiate the price to get an even better deal.
As most dealers are entitled to discounts (known as dealer holdbacks), you can gain additional legroom for negotiation.
It gives buyers a benchmark they can use when starting their car-buying process and a means to compare various car brands and models.
When in the process of purchasing, the MSRP is often the starting point of successful negotiations.
Most professional salespeople and dealerships will try to keep their focus on the MSRP and the monthly payment in the deals they offer.
How to Negotiate Beyond MSRP
When a car is brand new and in high demand, you will invariably find dealers charging higher than the MSRP.
In many cases, as soon as the initial buzz dies down, the price will go down alongside the MSRP as well.
There are cars which shoppers just don't buy. You can expect to access a price well below the MSRP in those cases.
You will even be able to get a price in some cases that is below the invoice price paid by the dealer.
Wait for the right moment and stay aware of ongoing launches and offers.
Additionally, keep yourself up-to-date on new car reviews as it will help you identify cars that sell particularly well or are struggling on the market.
Staying updated and acting on time are some of the best ways to negotiate beyond the MSRP.
Our View
We understand that buying a car can be overwhelming.
There are so many things to take care of – the model, interior, accessories, documentation, financing (if necessary), and more.
Still, if you are interested in a great deal, you must start by figuring out the MSRP of the preferred vehicles.
It will help you to get a clearer understanding of your financial requirements and provide you a starting point to arrive better prepared to negotiate the best available deal on your purchase – be it financed or paid in full.
