Manufacturer’s suggested retail price (MSRP): What to know
As the name suggests, a manufacturer’s suggested retail price (MSRP) is how much a manufacturer recommends their product be sold for. Retailers use this amount as a benchmark to determine pricing. MSRP is commonly used in automotive sales and for retail items such as appliances or electronics.
What you’ll learn:
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MSRP is a manufacturer’s recommended retail price for automobiles, appliances, electronics and more.
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Car dealers are required by law to post MSRP on windows of new vehicles for sale.
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The MSRP can include manufacturing and sales costs and the average retailer markup.
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MSRP provides a vehicle cost recommended by the manufacturer. But, based on a number of factors, the price the dealership chooses to sell the car for may be lower or higher.
What does MSRP mean for cars?
The MSRP is what automakers say dealers should charge for their vehicles.
The Automobile Information Disclosure Act of 1958 requires MSRPs to be posted on the windows of new vehicles for sale. The law gave buyers a benchmark for the value of cars.
Typically, a window sticker will show the MSRP and other vehicle information to buyers. That’s why the MSRP is often called the sticker price. You may not see an MSRP sticker on a used vehicle because it’s not required and the value of used cars can vary significantly.
How is the MSRP determined?
The manufacturer determines the MSRP, and the MSRP can’t legally change from retailer to retailer. The MSRP is typically higher than the base price. For cars, base price refers to the cost of the vehicle without optional add-ons, such as a sunroof or advanced safety and tech features.
Manufacturers typically base MSRP on upfront expenses, including manufacturing and sales costs. The suggestion might also factor in how much they suggest dealerships mark up the price. But that doesn’t mean dealers have to stick to it when it comes to the final price.
How is a car’s final price determined?
A car’s final price can depend on a variety of factors, such as:
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Additional protections: Extended warranties, maintenance packages and gap insurance can increase the final price.
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Demand: If the vehicle is in high demand, dealerships might charge more than the MSRP. Or they may charge less to encourage sales.
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How the dealership purchased the car: The final sales price can depend on whether the car was purchased from the vehicle manufacturer or from a third party.
Invoice price vs. MSRP: What’s the difference?
The invoice price is how much the dealer paid to buy the car from the manufacturer. MSRP is typically higher than the invoice price because it can include markup or accessories added by the dealer to turn a profit.
Key takeaways: MSRP for cars
Understanding what’s included in the MSRP of a vehicle can help you make an informed decision if you’re thinking about purchasing a car.
Once you find a car you’re interested in, check out these tips for negotiating car prices below MSRP.
