MSRP - Base Price - Invoice Price - General Info

When purchasing a new car, you are entitled to receive as fair a price as possible. It only takes a little bit of research to help you make the best decision possible when investing in a new car. Here are some simple definitions for a few often mystifying terms that you should be aware of when buying a new car. This article explains the MSRP and what it tells you - Base Price - Invoice Price - And general details on the different pricing terms.

MSRP – The Manufacturer's Suggested Retail Price

The dealership must clearly display somewhere on the vehicle the retail price suggested by the manufacturer. This is usually done by means of a sticker known as the Monroney sticker, which, besides the vehicle's MSRP, also displays its base price, its standard options, any factory-added options, and specific prices for each of these. You can also find both the vehicle's base price and its MSRP on the manufacturer's web site.

Don't worry too much about the MSRP. In most cases, the dealer doesn't expect anywhere near this price. The MSRP is used as a starting price trick that you are expected to negotiate down from.

The Base Price

A new car's base price is the bottom dollar offer for that vehicle with no extras or add-ons. Any standard options available to the car will be included in the base price. This number will not, however, include any taxes, ownership transfer costs, or delivery fees that may come with the vehicle.

The Invoice Price

This is the number that the manufacturer will supposedly invoice the dealership for the vehicle. Destination and delivery fees should be included in this number, and it may fluctuate depending on any factory-installed add-ons that the vehicle may come with.

Even if the dealer sells you a car at this rock-bottom invoice price, he will still make money on it. This is possible due to the fact that this invoice price is not even the actual amount the dealer paid for the car. Lucrative rebates and volume discount incentives lower what the dealer actually pays for the car by quite a bit. Added to this is something called a holdback. A holdback is a certain percentage of the base invoice price that is refunded to the dealer by the manufacturer. Some manufacturers offer holdbacks, others do not.

Both used and new cars offered by the dealership are usually "packed." A certain amount of "pack" money is added to the price just to ensure that a little something is made on each vehicle sold. Pack money may vary greatly between dealers, usually goes straight to the dealership's owner, and is rarely up for negotiation.

Many times the invoice price is nothing more than a fairytale number that the dealer would have to pay to the manufacturer if only that one vehicle were sold. Never start your price negotiations from the MSRP and attempt to bring the price down. Always begin from the invoice price and get the dealer to try to negotiate you up.

Remember, the dealer never expects you to pay the MSRP. It's just a starting price trick. The better you can remember these definitions and pricing schemes, the better equipped you will be to negotiate a great price for your new car.

The MSRP Sticker

Let's take a look at what information and costs are included on the MSRP sticker. A typical MSRP sticker will include the following things:

The car's standard features. Standard features are always included in the MSRP.

• The Vehicle Identification Number. It's important to compare the VIN across all documentation to ensure that it is accurate.
• The MSRP. Also known as the list or retail price, this does not usually include extra options or delivery fees.
• Extra add-ons. These are any special features the vehicle may come with, the cost of which is added to the MSRP. If you like extra options, make sure to look at options packages as they can often be cheaper than adding each extra individually.
• Delivery fee. This covers the cost of transporting the automobile from the factory where it was made to the dealer's lot. The delivery fee is usually identical for all cars from a given manufacturer.
• Fuel efficiency. Often the figures that are shown here display much more accurate totals for both highway and city driving than the EPA's general fuel efficiency estimates.
• Total amount. The final price displayed on the sticker will include the base MSRP, any add-ons and add-on package discounts, delivery fees, and any market adjustments. Taxes, registration costs, and title transfer fees are not included in this total amount. Remember, never negotiate down from this number. Instead, bargain up from the invoice price.
• Emissions ranking. This number compares the vehicle's total emissions with other vehicles from its model year. If the number is quite low or even zero, this doesn't signify that the vehicle gives off zero emissions but rather that it performs well when compared to other vehicles from its model year.
• Parts content info. This will show you where the major components of the vehicle came from and where it was finally assembled. A lot of manufacturers build their parts and assemble their vehicles in very diverse locations.
• Safety ratings. The National Highway Traffic Safety Administration's ratings are now printed on these stickers. This usually includes rollover risk ratings as well as front and side impact crash ratings.

Before you begin your price negotiations, find out what the dealer actually paid for the car. Although this used to be easier said than done, today, a simple Internet search can turn up a wealth of information along these lines. Once you've gotten hold of this number, tell it to the dealer right up front, and have him negotiate up from his cost price.