The Difference Between Sales Price, Dealer Price, Invoice Price, MSRP, and More
By Jakob Hansen, 3/3/2023
Each price has its own purpose and meaning, and understanding them can help you make an informed decision...
When shopping for a car, you'll encounter a variety of prices that can be confusing and overwhelming. Each price has its own purpose and meaning, and understanding them can help you make an informed decision and get the best deal possible. In this article, we'll break down the most common car prices you'll encounter and what they mean.
MSRP (Manufacturer's Suggested Retail Price)
The MSRP is the price the manufacturer recommends the dealer to sell the car for. It's often referred to as the "sticker price" and is typically the highest price you'll see for a car. The MSRP includes the cost of the car, any optional features, and the destination fee (the cost to transport the car from the factory to the dealership).
While the MSRP is a useful starting point for negotiations, it's important to remember that dealers can sell the car for less than the MSRP if they choose to do so.
The dealer price is the amount the dealer paid for the car from the manufacturer. It's also referred to as the "wholesale price" or "invoice price." The dealer price is often lower than the MSRP and is the starting point for negotiations between the dealer and the buyer.
The sales price is the final price you agree to pay for the car. This includes any negotiations, discounts, rebates, and financing options. The sales price is the most important price to pay attention to, as it's the amount you'll actually be paying for the car.
It's important to note that the sales price can vary depending on factors like the time of year, the popularity of the car, and the dealer's inventory levels.
The negotiated price is the price you and the dealer agree upon after negotiations. This can be lower or higher than the sales price depending on factors like your negotiation skills and the dealer's willingness to work with you.
The dealer holdback is a percentage of the car's MSRP that the manufacturer pays the dealer after the car is sold. It's meant to help cover the dealer's overhead costs like advertising, rent, and salaries. The dealer holdback can vary by manufacturer but is typically around 2-3% of the MSRP.
Dealer incentives are discounts that the manufacturer offers the dealer to help move inventory. These incentives can be in the form of cash rebates, low-interest financing, or lease specials. The dealer can choose to pass these incentives on to the buyer, making the car more affordable.
The destination fee is the cost to transport the car from the factory to the dealership. This fee is included in the MSRP and is non-negotiable.
Understanding car prices can be confusing, but it's essential to know what each price means to make an informed decision and get the best deal possible. Remember to focus on the sales price, as this is the amount you'll actually be paying for the car. Use the MSRP and dealer price as starting points for negotiations and take advantage of dealer incentives to save even more money.
By understanding car prices, you'll be able to navigate the car buying process with confidence and get the best car for your budget. Happy shopping!