What Is MSRP? Manufacturer's Suggested Retail Price for New Car Buying

MSRP meaning, plus other car pricing terms defined

If you're shopping for a car and are fairly new to the process, you've probably seen the acronym "MSRP" either on the window sticker or in an advertisement and wondered, "What does MSRP mean?" 

MSRP meaning: MSRP stands for "manufacturer's suggested retail price." In the automotive world, it's the price that a manufacturer recommends car dealers charge for the vehicle, including any optional equipment. It is also found on the automaker websites and shopping websites such as Edmunds. Car buying has a language of its own, and MSRP is one of many terms you'll encounter at a dealership or when shopping online.

We're going to focus on MSRP here, but if you'd like to learn about other commonly used words, read this article:
Car Invoice Prices, MSRP and Car Market Value: New Car Buying Terms Defined

To get the best deal, you'll want to understand what the "suggested" price means to your bottom line when buying your next car. The keyword "suggested" is used because the automaker can set what it believes is a fair price for a vehicle, but its dealers aren't typically bound to follow it.

Jump to:

Why is MSRP important?

Fundamentally, MSRP is a consumer protection. Manufacturers and dealers are required by federal law to post a vehicle's price in the window — literally, the "window sticker" — which includes the price of the car, the price of any extra features and options, and assorted fees. A suggested price from the manufacturer helps keep pricing consistent across dealers and assures buyers that they're paying about the same as anyone else. Depending on demand for the car, however, the actual price can vary wildly from the MSRP (as we'll see below).

Related article: How to Read a New Car Window Sticker

Does every new car have an MSRP?

No. There are a few brands that don't use dealers. Instead, they sell their vehicles directly to the consumer. Tesla is the most well-known example. In this case, the price that the automaker advertises is what you'll pay. There's no MSRP to negotiate. However, you'll still likely need to pay the additional destination fee plus other fees or taxes.

Is MSRP the same as the selling price?

No. A vehicle's selling price is determined by its market value, installed accessories or added markup, possible incentives such as customer cash, and what a given dealership wants to charge. The interplay of these factors means some vehicles will sell for less than MSRP, while others may have a starting price above MSRP. Then there's the total price of the vehicle, which is commonly called the "out-the-door price" and includes the taxes, fees and interest charges on the loan.

Is MSRP the final price of the car?

No. MSRP is just one piece of the final price. A host of variables often determine the final purchase price, and while buyers don't need to understand dealership operations, it helps to know what the salesperson across the table or on the other side of the computer is up against in any transaction.

Various fees, such as the destination fee (the cost to transport the car from factory to dealer lot and passed on to the buyer), sales tax, registration and interest charges, are unfortunate realities that make that initial MSRP a bit more of a shock when the final numbers are tallied. This reality makes it even more crucial to understand a car's invoice price as a basis for your negotiations. The actual final price is often commonly referred to as the "out-the-door price."

Related articles:

Is MSRP the same as invoice price?

No. Broadly, a car's invoice price is the price that the dealer pays to buy it from the manufacturer. Less than MSRP, the invoice price builds in headroom for the dealer and various middle parties to make a profit. As a buyer, knowing the invoice price is helpful since it gives you an idea of a dealer's bottom line. After all, dealers are businesses, but knowing what the dealer already paid and where it reasonably wants to make a profit can inform your negotiations.

Read this article for more detailed information on a car's invoice price.

How much off the MSRP can I negotiate?

The discount you get off MSRP will depend on the demand and market value of the vehicle. You can expect to see larger discounts on slower-selling vehicles. But on a popular vehicle, even a couple of hundred dollars off might be considered a good discount. Depending on market conditions, you can sometimes negotiate to buy a car at the invoice price. 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 of what others have paid.

Related articles:

Can a car dealership charge more than MSRP?

Yes. The "S" in MSRP stands for 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 vehicle's selling price. 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."

Related article: Negotiating a Dealer's New Car Add-Ons

Why do dealers charge more than MSRP?

These rare or high-demand cars give dealers an opportunity to make extra profit. While it may seem outrageous or even unethical for dealers to mark up (a "market adjustment" in dealer parlance) a vehicle by several thousand dollars, they're within their rights to do it. And the reality is that there's almost always a waiting buyer.

Ethics aside, and even with the consumer protection intent of publishing the MSRP, there's nothing illegal about a dealer selling a vehicle for more than MSRP. Here it comes down to simple supply-and-demand dynamics. It pays to cast a wide net when searching for a new car, especially one in high demand. Again, every dealership has its own unique business needs, and a dealer in the next county, perhaps through local or regional incentives, might have a better deal on the car you want.

That said, there may be room to negotiate a better deal on a new or popular model. Some dealers intentionally aim high with a markup, giving themselves room to negotiate. As a buyer, it never hurts to start low and make a few offers until you find a dealer's threshold.

Should I pay more than MSRP?

That depends on how badly you want the car. For popular high-volume cars, it's usually not necessary. There are plenty of deals and regular incentive programs on these perennial favorites. For new models or special editions, it may be unavoidable. But there are a couple of ways around paying MSRP for a hot new model. One strategy is to get in early. When an anticipated new model is ready for release, call a dealer and place an order before the car arrives on the lot. (You may need to watch the automotive media to learn when new models are shipping.) You may need to pay a deposit, which is typical. Just make sure to get the selling price in writing and be clear on refund policies. Another way is to simply shop around and find dealers that don't include market adjustments. Some don't, but it may require searching around, even looking at dealers out of state.

Related articles:

Is it good to buy at MSRP?

Yes. There are times when paying the MSRP is acceptable. There can be many reasons why it's reasonable; for example, it might be the dealership's policy to sell its cars at MSRP. If a car is in limited supply or if the vehicle is in high demand — think of a brand-new or redesigned model — transactions well above MSRP are not uncommon. In this scenario, if a dealership is offering a car at MSRP, it can be considered a good price.

Related article: When to Pay Sticker Price for a New Car

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.

Price history graph example
See pricing history
by

Dan spent many years covering the go-fast, look-good, get-loud corners of the automotive universe. First, he served as editor of enthusiast magazines AutoSound and Honda Tuning, then as executive editor at SEMA News, the publishing arm of the trade group that produces the annual SEMA Show (yes, that show). As a contributor to Edmunds, he now likes to keep the volume low and the speed limit legal, providing expert car-shopping advice to drivers looking for the perfect match.

by

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.

edited by

Steven Ewing has worked in the automotive industry since 2003. In that time, he's written thousands of articles and tested just as many vehicles. Steven is Edmunds' director of editorial content and has previously been on staff at Winding Road magazine, Autoblog, Motor1.com, CNET, and was the U.S. correspondent for Top Gear magazine. Steven has also contributed to Automobile magazine, Car and Driver, The Drive, Jalopnik, Porsche Panorama, and dozens of other publications. In his spare time, Steven loves to play the drums, cook, and drive his 2000 BMW M Roadster.

Back to Top

Join Edmunds

Receive pricing updates, shopping tips & more!

Back to Top