The Complete Guide to Car Pricing: From MSRP to Out the Door

Understanding car pricing can be a daunting task for many buyers. With various terms and pricing strategies used by manufacturers and dealerships, it's crucial to arm yourself with knowledge before stepping onto a car lot. This guide will demystify car pricing terminology and provide you with strategies to get the best deal possible.

Understanding MSRP: The Starting Point

MSRP, or Manufacturer Suggested Retail Price, is often the first number you'll encounter when researching car prices. But what does it really mean?

What is MSRP?

MSRP is the price that the manufacturer recommends the dealer sell the car for. It's also known as the "sticker price" because it's typically displayed on the window sticker of new cars.

• It's a suggestion, not a requirement
• Includes the base price plus installed options
• Does not include destination charges, taxes, or fees
• Can be negotiated in most cases

Pro Tip: Use the MSRP as a starting point for negotiations, not as the final price you should pay.

The Monroney Sticker: Your MSRP Information Source

The Monroney sticker, required by law, provides vital information such as the MSRP, factory-installed options, fuel economy, and safety ratings. Use this as a key resource when evaluating vehicles.

Beyond MSRP: Other Important Pricing Terms

While MSRP is important, there are other critical terms to understand when negotiating the price of a car.

Base Price: The Bare Bones

The base price represents the cost of the car without any additional features or options. It's typically used in advertisements to attract attention but isn't usually the final price you'll pay.

Invoice Price: The Dealer's Cost

The invoice price is what the dealer pays the manufacturer for the vehicle. Knowing this price can give you leverage, but keep in mind it may not reflect the dealer's actual cost due to incentives and holdbacks.

Negotiation Tip: A fair price usually falls between the invoice price and the MSRP.

Asking Price: The Dealer's Opening Bid

This is the price the dealer initially wants for the car. It's often higher than what you should aim to pay and is negotiable in most cases.

True Market Value: What Others Are Paying

True Market Value (TMV) reflects the average price others are paying for the same car in your area. Use TMV as a benchmark during your negotiations.

The Final Tally: Out the Door Price

The out the door price is the final price you'll pay, including all fees, taxes, and extras. Always focus on this number when negotiating.

Components of the Out the Door Price

• Negotiated vehicle price
• Documentation fees
• Registration and title fees
• Sales tax
• Additional products (warranties, accessories, etc.)

Pro Tip: Always negotiate based on the out the door price, not just the vehicle price, to avoid surprises at the signing.

Strategies for Getting the Best Price

Here are some strategies to help you secure the best deal:

• Research thoroughly using resources like Kelley Blue Book or Edmunds
• Get multiple quotes from different dealers
• Understand and utilize current incentives
• Time your purchase for the end of the month or year
• Focus on the total cost, not just monthly payments
• Get pre-approved for financing

Conclusion

Understanding car pricing terminology is essential for any car buyer. By learning the difference between MSRP, invoice price, and out the door price, you can negotiate more effectively and ensure you're getting a fair deal. Remember, knowledge is power when buying a car, and the time you invest in research and negotiation will pay off.

Final Thought: The best price is one that's fair to both you and the dealer, ensuring a positive relationship for future service and purchases.