What Is the Difference between the Sticker Price and MSRP?

Buying a new vehicle can be fun, exciting, nerve racking and confusing all at the same time, and it is easy to forget that there could be a significant difference in a car’s sticker price and its MSRP, or manufacturers suggested retail price. So exactly how do these numbers differ and what exactly do they mean?

MSRP

By law all new cars for sale are required to list the MSRP on the sticker in the window. In fact only the purchaser of a new car is allowed to remove the sticker. To properly understand the differences we should first understand what these terms means. MSRP is the price suggested that dealers charge for the vehicle you are looking to buy. Factors that influence this price are the cost of manufacturing, the make and model, the specific trim options and where the car is being sold. Vehicles that are more popular in one region of the country will have a higher MRSP than those sold elsewhere. The MSRP is determined ahead of time by the auto manufacturer and it is only a suggested price, a guideline as to where dealers should base their starting asking price.

Sticker Price

The sticker price is what the dealership lists as the cost of the car and the price you will see the car for sale for. This price includes additional charges such as transportation and preparations costs (sometimes called a destination charge) and dealer or after market installed options. These additional charges are not part of the initial MSRP but are part of the final cost of the vehicle. Since the MSRP is a suggested price the dealer is free to charge whatever he wants for the vehicle. Some cars may become so popular that dealers can charge, and sell, far more than the MSRP.

Invoice Price

It is important to understand that the MSRP and sticker price are different than the invoice price. The invoice price, or wholesale price, is what the dealership pays for the car. It is less than both the MSRP and the sticker price you see. The difference between the invoice price and the MSRP is the built in profit auto manufacturers set for dealerships. The real profit a dealership makes is the price the car sells for minus the invoice price. This is how car dealerships can negotiate on the price of a new vehicle.

Negotiating for a car can be a sticky process and many dealerships will lead buyers to think that the MSRP or sticker price is what a buyer has to pay. In truth you have a lot of wiggle room to negotiate based on several factors that include your down payment, any trade ins and the invoice price of the new car. Some factors in the sticker price may force the invoice price higher if after market options have been added. Arming yourself with the knowledge ahead of time and knowing the invoice price and MSRP will prepare you for your next trip to the dealership to purchase your new car.