What is MSRP vs sticker price? Discover The Differences In 2024

We see these terms all the time: MSRP, sticker price, out-of-door price, and they can be very confusing. This can be an issue, since understanding the difference between these terms is crucial to making an informed purchasing decision.

So, what is MSRP and where does it come from? Let’s find out. 

The MSRP is the Manufacturer’s Suggested Retail Price, and it’s a recommended price coming from the manufacturer. However, that’s not the only price that you may find.

Different prices exist because, once a vehicle arrives at a dealership, it can include other options and fees. 

What is MSRP and how does it differ from the sticker price?

Manufacturer’s Suggested Retail Price (MSRP) is the price recommended by the car manufacturer as the selling price for a new vehicle. On the other hand, the sticker price is the amount displayed on the vehicle at the dealership, which can include additional charges such as dealer-installed options and fees.

Definition of MSRP

The first question to answer is: what is MSRP? MSRP stands for Manufacturer’s Suggested Retail Price. It is the price recommended by the car manufacturer as the selling price for a new vehicle.

Though this price comes from the manufacturer, dealerships don’t have to stick to it. That’s where sticker price becomes relevant. 

Understanding Sticker Price

The sticker price is the amount displayed on the vehicle at the dealership, which may include additional charges for dealer-installed options and fees.

Difference between MSRP and Sticker Price

The key difference between MSRP and the sticker price is that MSRP is the manufacturer’s suggested price, while the sticker price may include additional dealer charges.

What are these charges? They can include the gas-guzzler tax, which applies to vehicles that don’t meet fuel economy standards. Another fee includes the destination charges. 

This is when the manufacturer charges to deliver vehicles to the dealership. This fee is usually passed on to the customer and is usually not negotiable. 

Then, there are the famous (or infamous) dealership add-ons. These fees include many aspects, such as window tints, splash guards, mats, and safety devices.

While they’ve earned a reputation of being non-negotiable, the dealership add-ons can be negotiated. 

How is the MSRP calculated for a new car?

The calculation of MSRP for a new car takes into account various factors such as production costs, marketing expenses, and desired profit margin. Manufacturers also consider market demand and competition when setting the MSRP.

Factors Influencing MSRP

The factors influencing MSRP include production costs, marketing expenses, profit margin, market demand, and competition in the automotive industry.

Role of Manufacturer in Setting MSRP

Car manufacturers play a crucial role in setting the MSRP by analyzing various factors and determining a competitive yet profitable price for their vehicles.

Impact of Features on MSRP

The inclusion of additional features and options can significantly impact the MSRP of a vehicle, as more features often lead to a higher selling price.

Should I pay the sticker price or negotiate for a lower price?

Whether to pay the sticker price or negotiate for a lower price depends on various factors such as market conditions, vehicle demand, and individual preferences. It is generally advisable to negotiate below the sticker price to secure a better deal.

Now, it’s more common to negotiate the dealership add-ons. Moreover, some dealerships have begun highlighting that they don’t include them. 

There’s always room for negotiating, and we encourage you to negotiate. Many people wonder if the sticker price is final, and this isn’t necessarily true.

However, you might find that dealerships state: “the sticker price is final!” This means that the dealer won’t negotiate.

Tips for Negotiating Below Sticker Price

Effective negotiation tips include researching market value, being willing to walk away from a deal, and leveraging competitor prices to negotiate a lower selling price.

The more information you have on the car you want to buy, the more you will be able to negotiate. Demand is one vital bit of knowledge, as it can sway prices your way. 

When to Consider Paying Sticker Price

Paying the sticker price may be considered in situations where demand for the vehicle is high, or when the dealership offers incentives or discounts that offset the sticker price.

Dealer Incentives and Discount Opportunities

Dealerships may provide incentives or discounts to encourage buyers to purchase a vehicle, which can help mitigate the impact of paying the sticker price.

Understanding the Invoice Price and its relation to MSRP

The dealer invoice price is the amount the dealership pays to the manufacturer for a vehicle. This price is lower than the MSRP and is often used as a starting point for negotiations between the dealer and the buyer.

Part of what is MSRP and how to negotiate is understanding all these nuances.

Exploring the Invoice Price

Exploring the invoice price gives buyers insight into the dealership’s cost for the vehicle, allowing for more informed negotiations based on the difference between invoice price and MSRP.

How Invoice Price Differs from MSRP

The invoice price is lower than the MSRP as it reflects the actual cost of the vehicle to the dealership, excluding additional charges and markups.

Impact of Invoice Price on Negotiations

The invoice price influences negotiations by providing a reference point for buyers to negotiate a price closer to the dealer’s cost rather than the MSRP.

How to effectively compare MSRP and negotiate the best deal for a new car?

Comparing MSRP across different dealerships and utilizing it as a benchmark can help buyers assess the competitiveness of pricing. Employing effective negotiation strategies can lead to securing a better deal on a new car purchase.

Researching Market Value

Researching market value enables buyers to understand price trends and make informed decisions when comparing MSRP and negotiating a favorable selling price.

Utilizing MSRP as a Benchmark

MSRP can serve as a benchmark for comparing prices across different dealerships and identifying opportunities to negotiate a lower price based on the manufacturer’s suggested retail price.

Strategies for Negotiating a Lower Price

Effective negotiation strategies include being prepared, staying firm on desired price points, and leveraging available information to negotiate a lower price than the MSRP.

Closing thoughts on what is MSRP?

So, what is MSRP? The Manufacturer’s Suggested Retail Price (MSRP) is a starting point set by car manufacturers, but it’s only that, a reference. The sticker price at the dealership can include additional fees and dealer-installed options, potentially raising the cost.

Unlike the MSRP, these additional charges can be negotiated, providing an opportunity for buyers to lower the out-of-door price.

You’ll have a better time negotiating when you research and understand the difference between MSRP and the dealer invoice price, as well as the impact of dealership add-ons on the final price.

This way, you negotiate with a better understanding of how much room there is to negotiate below the sticker price, especially regarding add-on fees that dealers may be more willing to adjust.

In conclusion, while it may be tempting to accept the sticker price, informed buyers can leverage their understanding of MSRP, sticker price, and invoice price to negotiate a more favorable deal.

It’s crucial to research, prepare, and be willing to discuss terms and prices to ensure the best possible outcome when purchasing a new vehicle.