What is MSRP?
MSRP stands for manufacturer’s suggested retail price. Dealers are required to display the MSRP for new vehicles. Here’s why.
As its name implies, the manufacturer’s suggested retail price (MSRP) is the price a manufacturer recommends that dealers charge for a new vehicle. The key letter in this acronym is the s for suggested — while a dealer is federally obligated to display a vehicle’s MSRP, they’re still entitled to sell the car for a higher or lower price than the MSRP.
For customers, the MSRP provides a known starting point for the cost of a new car, which can be helpful during price negotiations. For dealers, the MSRP provides a starting point for selling a new vehicle at a reasonable profit, which can then be added to or subtracted from depending on market conditions.
Understanding MSRP is an essential step in the car buying process. Let’s take a closer look at how a vehicle’s MSRP is determined, what it does and does not include, and when you might expect to buy above MSRP.
How is the MSRP determined, and what does it include?
The MSRP neatly wraps up the cost required to make and sell a car at a reasonable profit into one number. When manufacturers set the MSRP for each vehicle, they take into account a variety of factors.
MSRP typically includes:
• Vehicle research and development costs
• Vehicle manufacturing costs, particularly labor and materials
• Vehicle sales, marketing, and overhead costs
• Standard car warranty and service coverage
Vehicle MSRPs also include the average vehicle markup. This gives dealerships a clear idea of a reasonable price for selling their vehicles. That said, your final sales price will likely still be different than the MSRP because the MSRP doesn’t consider market conditions, trim add-ons, the potential for a dealer bargain, and other costs involved in the purchase of a new vehicle.
MSRP does not typically include:
• Sales tax
• Additional government charges or taxes
• Registration, title, and license fees
• Documentation fees (check for your state’s cap)
• Dealership fees (market adjustment fees, vehicle preparation/pre-delivery inspection fees, advertisement fees)
• Extended warranties
• Dealership deals and sales
*Taxes and government charges should generally be consistent from dealer to dealer all things being equal. Fees and dealer add-ons may vary substantially. It’s best to thoroughly review these line items to ensure you are receiving an appropriate benefit and to confirm whether the fees are in fact negotiable or mandatory.
Some of these costs will be included as line items on the same window sticker as the MSRP, often included in a figure referred to as Total MSRP, while other additional costs may be displayed on a “supplemental sticker.” Regardless, it’s generally wise to ask for an itemized list of what’s contributing to the dealer’s asking price.
MSRP vs. sticker price
The MSRP is the largest component of the sticker price, which is likely why the two are often spoken of interchangeably, but the two are not one and the same.
The sticker price refers to the total price on the window sticker found on new cars that are for sale at a dealership. Line items on the window sticker typically include the MSRP, optional features or equipment, as well as destination fees (also referred to as delivery, processing and handling fees). Keep in mind that the information included in this sticker price will be different from the information supplied in the “supplemental sticker” mentioned above.
MSRP vs. invoice price
While the MSRP represents the price that the manufacturer recommends for the sale of a vehicle, the invoice price reflects the actual cost of the car to the dealership.
In other words, the invoice price is the price the dealer paid the manufacturer to purchase the vehicle. It is lower than the MSRP — that’s part of how car dealerships make the profit they need to run their business. If you’re in a position to negotiate price, finding a number somewhere in between a car’s invoice price and the MSRP is your best bet.
MSRP vs. base price
The base price is the cost of the vehicle without any additional features. The MSRP is the base price plus the cost for whatever additional features were factory-installed by the manufacturer before the dealership purchased the car, typically called options or optional equipment.
Vehicles can be sold at various trim levels, from “base models” to “luxury trims”; these set trim levels often have a “base price” that includes what comes standard at that level of trim.
When would you pay more than the MSRP?
Most of us want a good deal on a vehicle purchase, but there are situations where that’s less likely to occur.
The first occurs when the vehicle you want is in high demand. When the car or SUV you want is a hot new release — or when supply chain issues create a shortage of vehicles — the market value of those vehicles goes up and, more often than not, so do prices.
The second situation occurs when you want a specific feature in the vehicle you’re hoping to buy. Want your next car to sport a particular color? Can’t live without a sunroof? If the manufacturer produces vehicles with a feature you want in limited quantities only, you may have to pay more to purchase that vehicle.
Additional MSRP FAQs
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No. MSRP is the vehicle’s retail price before taxes. However, MSRP may be found on the same window sticker as certain taxes.
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No. Destination fees — the additional charge for delivering the vehicle from the factory to the dealer, and/or from the dealer to the customer – are not included in the MSRP of the vehicle, although they may be included in what's often referred to as the Total MSRP of the vehicle. They are also typically non-negotiable, even if you pick your vehicle up directly from the factory.
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No. MSRPs are used for other appliances and electronics, but they are most commonly associated with the sale of vehicles.
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The Automobile Information Disclosure Act of 1958 mandates the disclosure of certain information about a vehicle at the time of sale, including the MSRP. It applies to new vehicles with a gross vehicle weight rating (GVWR) under 8,500 lb. (most passenger cars). The law has been amended several times over the years to include, among other things, the mandatory disclosure of fuel efficiency ratings.
The original law resulted in the creation of window stickers, commonly called Monroney labels or the Monroney after Oklahoma Senator Almer Stillwell “Mike” Monroney , who sponsored the act. These window stickers display the information required.
Car Shopping with Mazda
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This article is intended for general informational purposes only and is based on the latest competitive information available at the time of posting. Information herein is subject to change without notice and without Mazda incurring any obligations. Please review a variety of resources prior to making a purchasing decision. Visit Resource Center for more articles.