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MSRP stands for “Manufacturers Suggested Retail Price.” It originated from laws enacted to protect consumers and small businesses. Before MSRP, dealerships were free to charge whatever prices they wanted and the unsuspecting car shopper had no idea what the car was really worth.

So obviously if you don’t know what a car really costs, you have no idea at what price to start negotiating with the dealer for the car you want.

So where do you see the MSRP price? Here’s where: It is the sticker price. But some clarification of terms is in order at this point…

The MSRP price is equal to the sticker price. The Invoice cost is what the dealer paid to the manufacturer for the car. The Holdback refers to Factory to Dealer Rebates. A good tip: Start your negotiations at around $2000 below the invoice price.

Dealerships used to place the MSRP price of each new car on a big sticker on the windshield to advertise to passing traffic. This practice has been mostly replaced with a spec sheet on a side window that lists the MSRP price.

But the MSRP price is not on all of the spec sheets: Some dealers leave it off the spec sheet on purpose of car models that are in high demand, hoping to negotiate the best price possible. Because if they did put the MSRP on the high-demand cars, potential car buyers might immediately expect to pay less than the price the dealership knows the market will bear.

…And if a buyer asks for the MSRP, the dealer can talk about it along with various “extras” the vehicle has. This way the dealer can start the negotiations from a higher starting price.

The MSRP price of a vehicle does not include registration, taxes, destination charges, and other miscellaneous fees and charges. Most people expect to get a discount off the MSRP, but when all the extra fees are added, the final price may be higher that the MSRP price. In fact, dealers used to inflate the MSRP artificially high so that they could offer you a big “discount,” making you think you were getting a great deal.

In recent years, however, the trend has been to set the MSRP closer to the actual market value. So when you add in the destination charge (which is non-negotiable) and other fees, your out-the-door cost will often exceed the MSRP.

So the MSRP is your friend. It allows you to start off at the same negotiating point as everyone else, no matter where you live. The MSRP puts everyone on the same playing field, while still allowing for free market trade.

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