Car Buyer’s Glossary: Understanding MSRP and Negotiating a Fair Price
When you’re shopping for a new car, you’ll often come across the term MSRP, which stands for “manufacturer’s suggested retail price.” This is the price that the manufacturer recommends the dealer should ask for the car. It’s also known as the sticker price and is required to be displayed on the Monroney (or window sticker) at every dealership.
However, it’s important to note that the dealership is not obligated to charge the full MSRP. In fact, they rarely do. The suggested price serves as a starting point for negotiations. Most buyers end up paying less than the MSRP, but in some cases, the price may be marked up due to high demand or supply shortages. This was particularly evident during the COVID-19 pandemic.
So, how is the MSRP determined? The manufacturer calculates it by adding up the base price, destination charges, and options on the car. The base price is the cost of the car without any additional charges included. When you combine all these factors, you get the MSRP.
It’s important to understand that the MSRP is not the same as the selling price. The “S” in MSRP stands for “suggested,” which means it’s an initial starting point for negotiations. Ultimately, the MSRP plays a significant role in determining what you pay for the car. Dealerships will try to get you to pay the full MSRP, but negotiations often result in a lower price.
It’s worth noting that the MSRP does not include sales tax or registration fees. However, if there is a gas guzzler tax on an inefficient car, it will be factored into the sticker price.
You may wonder how much below MSRP you can negotiate. The answer depends on various factors such as the specific car model, supply and demand, and available incentives. Generally, you have a better chance of negotiating a lower price for a slow-selling model. However, for newly launched enthusiast cars, you might have to accept paying above the MSRP. To determine a fair price, it’s helpful to research what other buyers are paying for the same model, known as the market value.
Another aspect to consider is destination fees. The advertised MSRP typically does not include destination fees, although some automakers may include them. However, the window sticker will display the total MSRP, which includes destination fees and other additional equipment.
Understanding MSRP is relatively straightforward and can be easily compared across different vehicle models within the same segment. Most manufacturers’ websites list the MSRP, making it simple to find out the cost of a car online. Keep an eye out for promotions and sales run by manufacturers, as they can significantly reduce the final price. If you’re patient and wait for the right opportunity, you may be able to drive away with a new car well below the listed MSRP.
In conclusion, knowing the MSRP and understanding how it factors into pricing negotiations is essential when buying a new car. By researching market values, being aware of promotions, and considering supply and demand, you can increase your chances of securing a fair deal and driving away with your dream car at the best possible price.