Buying a new car can be overwhelming when you want to be sure you get the best possible price. You may have heard of the invoice price and the MRSP, but if you don't know what they are and what they mean, you won't be able to calculate a fair price for the vehicle. However, if you educate yourself about the difference between the two, you will be prepared to negotiate with a car dealer and get a bargain.
Definition
MSRP stands for "Manufacturer's Suggested Retail Price." It is a suggested selling price set by the manufacturer for each vehicle. It is commonly known as the "sticker price" because it clearly listed on a sticker placed in all new car windows. The sticker will also list all of the standard and optional equipment on the car and each item's individual cost. It also lists the destination charge.
A car invoice is a document that lists all the standard and optional equipment on a car and the dealer's cost for each individual item. It also lists the destination charge.
Access
Dealers are required by law to have the MSRP sticker clearly displayed in the window of all new cars. Consumers have easy access to MSRP information simply by reviewing the window sticker.
Dealers do not have to reveal the invoice price of a car. However, many will let a customer see the invoice upon request. They do this because invoice information is widely available on the internet on sites like Kelly Blue Book and Edmunds. If they are unwilling to give it, the customer can get it anyway.
Meaning
Many customers believe that the MRSP is a car's real selling price. However, the "S" stands for "Suggested," and dealers are free to sell a car for more or less than the MSRP. Most commonly they will sell it for less if a customer negotiates. If a vehicle is a particularly popular or rare model, the dealer can sell it for more than the MSRP.
There is also a common belief that the invoice price of a car is the amount a dealer pays for it. While it does give the general amount, there are other factors that affect the dealer's true cost. A certain percentage of the car's cost, known as the holdback, is given to the dealer by the manufacturer. There may also be factory-to-dealer incentives that bring down the cost of a particular vehicle.
Usefulness
The MSRP is not very useful to a smart consumer because educated buyers pay below that amount. The invoice is useful because it gives a baseline price at which negotiations can begin. Some dealers will even sell cars below invoice price. They will still make money because they get the holdback and there may be lucrative factory-to-dealer incentives on the vehicle.
Additions
Both the invoice and MSRP sticker are pre-printed documents. However, some dealers will add items to the MRSP. These are typically optional items like fabric protection, undercoating and tinting that have been added to the car by the dealer rather than the factory. The items will usually be written in and added to the MSRP total. These items cost the dealer very little, so a shrewd buyer can often negotiate them out of the vehicle's price.
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