Discover what’s behind a vehicle’s sticker price and what it means to car shoppers.

When shopping for a new car, you’ll encounter the term MSRP. Here’s a quick look at what it means and how you can use this piece of information in negotiating a deal.

MSRP is also called sticker price

The Manufacturers Suggested Retail Price or MSRP is also called the sticker price. MSRP is federally required to be posted for all new cars. In addition to the price, the sticker lists all the car’s features.

Does MSRP include tax?

When looking at MSRP, keep in mind that it doesn’t include taxes or any dealer add-ons.

In Michigan, the 6% sales tax applies. On $48,247 (the average new vehicle transaction price in November), sales tax adds $2,894.82, bringing the total average price to $51,141.82.

What is invoice cost?

The price car dealers pay for a vehicle is the invoice cost. This can vary by dealership based on things like volume and manufacturer incentives. Online tools like Edmund’s True Market Value pricing system provide an estimate of the dealer’s invoice cost.

What MSRP means for car shoppers

For car buyers, the MSRP is a starting point for negotiations. In many cases, buyers can negotiate a lower price but not always. For models with limited supply and high demand, the sales price may be higher than MSRP.

Car shopping tip

Before shopping for a new car, get clarity on exactly how much you can afford. When you get pre-approval for an auto loan, you know exactly how much you can borrow. Plus, walking into a dealer with a preapproved car loan can give you more bargaining power; in order to gain your financing business, the dealer may offer better terms and rates.

 

All loans subject to approval. Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, and collateral conditions.