Car salespeople toss around phrases such as "MSRP," "dealer invoice" and "sticker price" all the time. But do you really understand what they mean? Car buying has a language of its own, and you need to understand the nuances of these pricing terms if you want to get the best deal. With this in mind, here are some frequently asked questions about these and other car shopping terms you may come across.
What Is MSRP? Manufacturer's Suggested Retail Price for New Car Buying
Understand these pricing terms to get a great deal
September 3rd, 2021
What does the MSRP price mean?
MSRP stands for manufacturer's suggested retail price. As the name indicates, it is the price that the manufacturer recommends dealers charge for the vehicle, excluding the destination fee. MSRP is cited in many advertisements and vehicle reviews. Learn more
What is the "sticker price" on a car?
The MSRP of a new car is listed on the window sticker, which is commonly referred to as the Monroney sticker or simply "the Monroney." As such, people often use the terms "sticker price" and MSRP interchangeably, but this technically isn't correct. The presentation of the MSRP can differ by automaker, but essentially the MSRP is the manufacturer's suggested price for the vehicle including any factory options but excluding the destination fee. Another separate line item on the Monroney is the gas guzzler tax, if applicable. The sum of these costs is the sticker price, which may be labeled on the sticker as "Total Vehicle Price" (Honda) or "Total Price" (Ram) or even, confusingly, "Total MSRP" (Ford). But don't let Ford confuse you — the MSRP is really just a component of the sticker price. Learn more
Is MSRP the final price?
Not usually. In many cases MSRP is actually the starting point for negotiations. Often a vehicle will sell for less than MSRP. That said, if the vehicle is in high demand — think of a brand-new or redesigned model — transactions well above MSRP are not uncommon. But keep in mind that MSRP is just one component of the final selling price, which also includes the destination fee, sales tax, registration, interest charges and more. This total is often called the "out-the-door price," which should be the actual final price. Learn more
Can a retailer charge more than MSRP?
Yes. As the MSRP acronym spells out, the figure is the "suggested" price, not the maximum price. Let's say there's a highly anticipated model coming out and the initial inventory will be limited. Some dealerships will use this as an opportunity to make an extra profit and add a "market adjustment" that raises the selling price of the vehicle. More commonly, you may come across a vehicle on the lot that has a number of dealer-installed options, such as wheel locks, all-weather floor mats and a cargo net. These items are bundled together and will raise the price of the vehicle. You'll find these extra dealer options itemized on a document adjacent to the window sticker called an "addendum" or "supplemental window sticker." Learn more
What is the invoice price?
Invoice price (sometimes referred to as "dealer cost") is the price that appears on the invoice the manufacturer sends to the dealer when the dealer receives a car from the factory. It is roughly what the dealership paid the automaker for the vehicle.
Knowing the invoice price is an important part of shopping for a new vehicle since it gives you an idea of the potential discount range, but it isn't the only number to focus on. The purchase price is often in between the manufacturer's suggested retail price (MSRP) and invoice. This is where the Edmunds Suggested Price comes into play since it looks at what other consumers are actually paying for a vehicle and reveals a fair price to pay. Learn more
What is the market value price?
The market value of a vehicle is the average amount that buyers in your area are paying for the vehicle. Edmunds calls this the Edmunds Suggested Price; it was previously called the True Market Value (TMV). The Edmunds Suggested Price is what we recommend you pay, not including taxes or fees. It is based on our analysis of millions of data points including supply, demand, incentives, options and recent nearby transactions.
The market value will usually lie in between the invoice price on the low end and sticker price on the high end. Because the market value is an average, some people will pay less and others will pay more. But by looking at the TMV or the Edmunds Suggested Price, you can get a rough idea of how popular the vehicle is and what you should expect to pay for it. If you already have a quote from the dealership, use the Edmunds Price Checker to help determine if you're getting a good deal. Learn more
What is the Blue Book price?
Kelley Blue Book is one of many resources that dealerships use to evaluate the pricing on a trade-in or used car. The value of a vehicle from its data is called the "Blue Book price" or "Blue Book value." Like Edmunds, Kelley lists its own used car values, using its own proprietary methods. Dealers will also consult NADAguides or the "Black Book," which are less consumer-oriented and are designed to help them determine wholesale prices. Learn more
How much off the MSRP can I negotiate?
It depends on the market value of the vehicle. You can expect to see larger discounts on slower-selling vehicles. But on a popular vehicle, even a couple hundred off might be considered a good discount. You can sometimes negotiate to buy a car at the invoice price, depending on market conditions. Occasionally, you can pay below invoice for a vehicle if there are incentives such as customer cash rebates or dealer cash. Dealer cash is unadvertised money the manufacturer pays the dealership to help it sell cars.
The dealer would like you to negotiate using the MSRP as the starting point. But the pro move is to use the dealer's asking price as the starting point because the dealership may have already discounted the vehicle from MSRP. Use the market value as your price target in the negotiations. If you can beat it, great! If you're at the market value or slightly above, at least you're in the ballpark for what others have paid. Learn more
Become the pricing expert in your area
The market is always changing, and prices fluctuate rapidly. So it's important to shop around for the best deal. The car pricing terms here will guide you as you get quotes and consider various offers. As you shop, you will become an expert on car pricing in your area during the period of time you're shopping for your car. And when you know the numbers behind the deal, it will make you a better negotiator.
See Edmunds pricing data
Has Your Car's Value Changed?
Used car values are constantly changing. Edmunds lets you track your vehicle's value over time so you can decide when to sell or trade in.
September 3rd, 2021
Ronald Montoya has worked in the automotive industry since 2008. He has written over a thousand car related articles and bought and sold over 100 vehicles over the course of his career. Ronald is a senior consumer advice editor and content strategy at Edmunds and has also contributed to the Associated Press. He has also been featured on ABC, NBC and NPR on a number of car shopping topics. He got his start in the auto industry by taking a part-time job at a car dealership, where he worked in the service and accounting department.
