What is MSRP?

Woman sitting in a new car and smilingImage: Woman sitting in a new car and smiling

In a Nutshell

When shopping for a car, one of the terms you’ll probably hear a lot is MSRP — manufacturer’s suggested retail price. Here’s a rundown of what MSRP means, and how to use it to help negotiate a fair price for your next vehicle.
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Manufacturer’s suggested retail price, or MSRP, is one of the most common terms you’ll come across when you’re shopping for a new car.

MSRP can be a helpful starting point when figuring out how much car you can afford and negotiating with car dealers.

Let’s take a look at what MSRP means and how to use this knowledge to help get you the best deal on the car of your dreams.

What does MSRP mean?

The manufacturer’s suggested retail price is a key figure to know when shopping for a new car. It’s also known as the “sticker price” of a vehicle. By federal law, the MSRP must be somehow displayed on the car window.

The MSRP is the price the auto manufacturer suggests the car dealer charge the consumer for the vehicle. However, the dealer doesn’t have to abide by that price. The MSRP doesn’t include optional features that you can select for the car, and these add-ons (along with a lot of other costs) can raise the price above the MSRP.

It’s important to keep in mind that while the MSRP makes up the bulk of the cost of a new vehicle, it’s not necessarily the selling price — and it doesn’t include every potential cost.

Fast Facts

What is Monroney sticker price?

The Monroney sticker price refers to the physical sticker displayed on vehicles that includes the MSRP information. The Monroney sticker includes the manufacturer’s suggested retail price along with other information like transportation charges, any options added to the vehicle and how many miles per gallon you’ll get.

What’s not included in MSRP?

The MSRP can give you an idea of what the dealer would like to charge you for a vehicle. But there are other pricing terms to know as you begin negotiations with a dealership.

  • Invoice price is the price the car manufacturer charges the seller for the vehicle. This cost usually includes any destination and delivery charges for the vehicle.
  • Destination charge is how much the dealer spent transporting a vehicle from the manufacturer. This is also known as the freight charge.
  • Registration fees are what you’ll be charged to own a car in a particular place. This varies from state to state.

Should I pay the MSRP?

The answer to that question may not be a simple yes or no. What is certain is that you should negotiate.

Haggling with salespeople may not be your idea of a pleasant shopping experience. But it’s important to keep in mind that the MSRP is only the manufacturer’s suggested retail price, meaning it’s not set in stone.

Many numbers you see in the cost breakdown of a vehicle are fair game for negotiating with the seller. Dealers may be willing to budge on price in order to lower your cost to a number that could be as much as 10% to 20% below the MSRP, the Federal Trade Commission says.

There may be times when a dealership won’t negotiate at all on MSRP, like when a new vehicle first comes out or is in high demand in your market. But if you don’t ask, you’ll never know what kind of deal might be possible.

Bottom line

Buying a car can be stressful, but by doing some research ahead of time and knowing the key terms and language of pricing, you’ll be better prepared and probably more confident to negotiate the price of your car — whether you pay in cash or take out a loan to finance it.

About the author: Paris Ward is a content strategist at Credit Karma, providing readers with the latest news that will aid their financial progress. She has more than a decade of experience as a writer and editor and holds a bachelor’s… Read more.