After deciding what type of car you want to buy, the next thing on your mind should be asking yourself what cars you can afford. Performing searches on manufacturer websites will show you “MSRP” of the vehicle. But what does MSRP mean? MSRP isn’t the only pricing term to know either. This article should clear up much of the terminology you’ll hear when discussing car prices.
What is MSRP?
MSRP stands for “Manufacturer Suggested Retail Price.” This is a guideline from the manufacturer explaining how much the car should be sold for by the dealer to the customer. This is the “window sticker price,” which allows room for profit for the dealer. This doesn’t mean that you have to purchase the car at this price, however. Many new cars are not even priced at MSRP when they go on the lot for sale. Some may be priced higher (if they are in large demand) or lower (if they are not selling quickly enough) than the MSRP.
All new cars are required to have a Monroney/window sticker visible, stating the options, gas mileage, and MSRP of the vehicle. Be sure to check this price to avoid paying above MSRP in normal circumstances.
The base price is the cost of a car without shipping and options. Options are anything that is not included on a vehicle by default. The base price is usually the advertised price by manufacturers but is not the price you’ll pay. There is (almost) always a delivery fee from the manufacturer to the dealer of a few hundred to a few thousand dollars. Also, vehicles without options are rare these days; most will have at least a few options such as cruise control, sunroof, or leather interior which isn’t included in the base price. Don’t dwell on the base price too much except to get a vague idea of how much the vehicle will cost.
The invoice price is the price the dealer pays the manufacturer for the vehicle. This is not something that the dealer generally advertises. When a dealer sells a vehicle, they obviously will want to sell above invoice to make a profit. However, there are times when a dealer may be willing to sell under invoice, such as when they are incentivized by selling a large volume of vehicles by the manufacturer. There are websites out there that will give average prices that dealers pay for a given make and model. Don’t be afraid to ask the dealer the invoice price as well.
The price that the dealer wishes to sell the car for is the asking price. This is generally shown somewhere on the windshield or visibly displayed hanging from the rearview mirror. Some dealers don’t show prices at all and you’ll have to ask what the price is for each vehicle you’re interested in individually. Note that the asking price may or may not be negotiable depending on the dealer. Some dealers will haggle, some will not.
Out the Door Price
This is the price you will actually have to get your wallet out for. This includes the asking price of the car (or the price you negotiated) plus any extras you selected (warranty, extras, gap insurance, etc.). Some dealers may also have documentation and other fees. Depending on where you live, the tax and titling fees may be included. If you know this information going in, you can adjust and look at vehicles that are within your budget at their “out the door” price.
Now that you’re armed with some information, it’s time to do some research for your next vehicle! Now you can gauge what cars are worth, and what they are selling for in your area at different dealers. You can start checking on carsforsale.com to make sure you are shopping where you are getting the best bang for your buck!