What Is MSRP? Manufacturer's Suggested Retail Price for New Car Buying

MSRP stands for the manufacturer's suggested retail price. As the name indicates, it is the price that the manufacturer recommends that dealers charge for a new vehicle, plus any options or packages. Note that MSRP is just a suggestion, meaning that the dealership is within its rights to charge more or less than this starting figure.

Car buying has a language of its own, and MSRP is one of many car pricing terms you'll encounter at a car dealership — invoice price, sticker price and destination fee are also among them. It is important to understand the meaning of these pricing terms if you want to get the best deal. With this in mind, here are some frequently asked questions about MSRP and other car shopping terms you may come across.

FAQs and other pricing terms

What is the "window sticker" on a car?
What is the "sticker price" of a car?
What is the destination charge on a car?
What is the market value price?
Is MSRP the final price you pay?
Is it good to buy at MSRP?
Can a car dealership charge more than MSRP?
Is MSRP the same as the selling price?
What is the invoice price?
How much off the MSRP can I negotiate?
What is the Blue Book price?

Frequently asked questions

What is the "window sticker" on a car?
On any given new or used car, you'll find a piece of paper attached to the front or a side window with pricing listed on it. This label is referred to internally as the "Monroney sticker," or simply "the Monroney," but many people have taken to calling it the window sticker. The presentation of the window sticker can differ by automaker, but they all contain details about the vehicle's standard and optional features, plus the MSRP.

Related article: How to Read a New Car Window Sticker

What is the "sticker price" of a car?
When people say "sticker price," they're usually referring to the total MSRP of the vehicle, including options, packages, destination charges, and other fees such as the gas guzzler tax (if applicable) or any manufacturer discounts. The sum of these costs is the sticker price, which may be labeled on the sticker as "total vehicle price," "total price" or even "total MSRP."

What is the destination charge on a car?
The destination charge covers the costs that an automaker incurs when transporting a new vehicle from the factory to the dealership. This cost is passed on to the customer and is part of the overall sticker price of the vehicle. It cannot be negotiated. The destination fee is one of many fees that are part of buying a car. This article offers more detailed information about other fees you may come across and ones that might raise a red flag.

Related article: What New Car Fees Should You Pay?

What is the market value price?
The market value price of a vehicle is the average figure that shoppers in a given area are paying for that vehicle. Edmunds calls this the Edmunds Suggested Price; it was previously called True Market Value (TMV). The Edmunds Suggested Price is what we recommend you pay, not including taxes or fees. This market value is based on our analysis of millions of data points including supply, demand, incentives, options and recent nearby transactions.

For new cars, the market value will usually lie between the invoice price on the low end and the sticker price on the high end. For used cars, the market value is based on the average sales or trade-in price for comparable vehicles. Because the market value is an average, some people will pay less and others will pay more. But by looking at the TMV or the Edmunds Suggested Price, you can get a rough idea of how popular the vehicle is and what you should expect to pay for it. If you already have a quote from the dealership, use the Edmunds Price Checker to help determine if you're getting a good deal. And for those trading in a vehicle, use Edmunds' appraisal tool to help you determine its trade-in market value.

Related tools:

• Edmunds TMV — True Market Value / Car Values
• Edmunds Price Checker
• Edmunds Appraisal Tool

Is MSRP the final price you pay?
No. MSRP is just one component of the final price, which also includes the destination fee, sales tax, registration, downpayment, interest charges and more. This total is often called the "out-the-door price," which should be the actual final price.

Related articles:

• How Much Should a Car Down Payment Be?
• Get the Out-the-Door Price When Buying a Car

Is it good to buy at MSRP?
Yes. There are times when paying the MSRP is acceptable. There can be many reasons why it's reasonable; for example, it might be the dealership's policy to sell its cars at MSRP. If a car is in limited supply or if the vehicle is in high demand — think of a brand-new or redesigned model — transactions well above MSRP are not uncommon. In this scenario, if a dealership is offering a car at MSRP, it can be considered a good price.

Related article: When to Pay Sticker Price for a New Car

Can a car dealership charge more than MSRP?
Yes. As you see when the MSRP acronym is spelled out, the figure is the suggested price, not the maximum price. Let's say there's a highly anticipated model coming out and the initial inventory will be limited. Some dealerships will use this as an opportunity to make an extra profit and add a "market adjustment" that raises the selling price of the vehicle. More commonly, you may come across a vehicle on the lot that has a number of dealer-installed options, such as wheel locks, all-weather floor mats and a cargo net. These items are bundled together and will raise the price of the vehicle. You'll find these extra dealer options itemized on a document adjacent to the window sticker called an "addendum" or "supplemental window sticker."

Related articles:

• Should You Pay More Than MSRP for a Car?
• Negotiating a Dealer's New Car Add-Ons

Is MSRP the same as the selling price?
No. The selling price of a vehicle is determined by its market value, installed accessories or added markup, possible incentives such as customer cash, and what a given dealership wants to charge for it. The interplay of these factors means some vehicles will sell for less than MSRP, while others may have a starting price above MSRP.

What is the invoice price?
Invoice price (sometimes referred to as "dealer cost") is the price that appears on the invoice the manufacturer sends to the dealer when the dealer receives a car from the factory. It is roughly what the dealership paid the automaker for the vehicle.

Knowing the invoice price is an important part of shopping for a new vehicle since it gives you an idea of the potential discount range, but it isn't the only number to focus on. There are more aspects to getting a good deal than simply finding the invoice figure, so treat it as one of many tools at your disposal.

Related article: What Are the Elements of a Good New Car Deal?

How much off the MSRP can I negotiate?
The discount you get off MSRP will depend on the market value of the vehicle. You can expect to see larger discounts on slower-selling vehicles. But on a popular vehicle, even a couple of hundred dollars off might be considered a good discount. Depending on market conditions, you can sometimes negotiate to buy a car at the invoice price. Occasionally, you can pay below invoice for a vehicle if there are incentives such as customer cash rebates or dealer cash. Dealer cash is unadvertised money the manufacturer pays the dealership to help it sell cars.

The dealer would like you to negotiate using the MSRP as the starting point. But the pro move is to use the dealer's asking price as the starting point because the dealership may have already discounted the vehicle from MSRP. Use the market value as your price target in the negotiations. If you can beat it, great! If you're at the market value or slightly above, at least you're in the ballpark for what others have paid.

Related articles:

• How to Negotiate Car Prices
• How to Use New-Car Incentives and Rebates

What is the Blue Book price?
When people mention the "Blue Book price," chances are they're using it as shorthand for the Kelley Blue Book (KBB) value. KBB is one of many resources that dealerships use to evaluate the pricing of a trade-in or used car. The market value of a vehicle gathered from KBB is often referred to as the "Blue Book price" or "Blue Book value." Like Edmunds, Kelley publishes its own used car values, using its own proprietary methods. Dealers will also consult NADAguides or the "Black Book," which are less consumer-oriented and are designed to help them determine wholesale prices.

Related articles:

• Kelley Blue Book Value for Used Cars — What is it and how does it work?
• NADAguides — Understanding NADA Value
• Black Book Value — Decoding Black Book Car Value

The bottom line

The market is always changing, and prices fluctuate constantly. So it's important to shop around for the best deal. The car pricing terms here will guide you as you get quotes and consider various offers. As you shop, you will become an expert on car pricing in your area during the period of time you're shopping for your car. And when you know the numbers behind the deal, it will make you a better negotiator.