| MSRP stands for "Manufacturers Suggested Retail | | | | History of the MSRP You Should Know |
| Price," so to say "MSRP price" is redundant. | | | | The MSRP was established as a "consumer |
| Nevertheless it's often mentioned this way. | | | | service" back in 1958 from a bill passed in |
| The MSRP price of a vehicle is exactly which it | | | | Congress. U.S. Senator Mike Monroney sponsored |
| says: It's a "suggested" retail price. But if you | | | | the bill, so the sticker you see on every new car |
| understand anything at all about the term, "retail," | | | | is often called "the Monroney sticker" by industry |
| you already know that you almost NEVER pay | | | | insiders. Car manufacturers are required to put it |
| retail for any product, including new cars. The only | | | | on each new car produced, and it can't be legally |
| exceptions are convenience stores and the like. | | | | removed except by the car buyer. It was |
| Most "retailers" realize this and price their goods at | | | | supposed to protect the consumer by requiring |
| some point below retail. But they prominently | | | | the manufacturer to itemize exactly what the |
| display the retail price directly next to the actual | | | | buyer was paying for. The MSRP listed on the |
| price you pay. | | | | sticker was a good place to start negotiation |
| This is done, of course, to make it appear you're | | | | toward the final, drive-off-the-lot price. |
| getting a great deal, which equates to more sales. | | | | Dealer 'Kickbacks' |
| Because if you THINK you are getting a good | | | | But now, the MSRP price quoted on this sticker is |
| deal, it has been proven that you will part with | | | | nothing but fiction. This is because the car |
| your money - even if you are actually | | | | manufacturers - in an effort to help move more |
| over-paying for a product. | | | | vehicles - have teamed up with their sales force |
| A surprising number of car buyers pay the MSRP | | | | (the dealerships) and created a number of legal |
| (or close to it) for new cars. Some don't know | | | | "kickbacks" for the dealers for every car sold. |
| better, and some just don't want to haggle. | | | | These are known as dealer holdback, |
| These customers are a car dealership's dream | | | | factory-to-dealer incentives, dealer incentives, and |
| shoppers. Many consumers believe if they get a | | | | the like. Basically, cleverly designed legal |
| new vehicle below MSRP that the dealership didn't | | | | "kickbacks." |
| even make a profit off of them, or that they | | | | This is how these dealer incentives work: |
| screwed the poor car salesman. | | | | For example, at the end of the year or the |
| These folks are truly mis-informed because | | | | quarter, the manufacturer will send a check to |
| nothing could be further from the truth! | | | | the dealer for a total of all the money held back |
| Q: When was the last time you paid retail for a | | | | for the sales of a particular vehicle. ("Dealer |
| clothing item? Precisely. Which means you need to | | | | holdback.") Just how much is usually a percentage |
| look at the MSRP price in the same light; don't | | | | - supposedly between two and five percent. |
| pay it! But unlike 'normal' retailers, since the price | | | | "But Charles," you say, "what if I know all of |
| the car dealership is willing to sell a car is not | | | | these incentives and the dealer invoice before |
| advertised, it's up to you to do a little homework | | | | going into the dealership. This way I will be able to |
| before you show up at the car lot. | | | | make an offer they'll accept while saving big." |
| Quickly, know this: | | | | And that's precisely what you should try to do. |
| Despite knowing all sorts of info like the factory | | | | But don't ever think for a second that you can |
| invoice, dealer holdback, dealer incentives, etc. for | | | | know about other legal "kickbacks" that protect |
| the car you're interested in, you will never, EVER | | | | the dealership from selling a car at actual cost. |
| know the actual price that the dealer is paying for | | | | (Which would be crazy, right? It's a business, not |
| that car. Period. All you can know are the things I | | | | a charity!) But yes, these 'secret' but perfectly |
| mentioned - the things you are allowed to know. | | | | legal dealer incentives are there, and it's one of |
| And, yes, you can use these to get your best | | | | the things that keeps them in business when folks |
| possible deal. But don't ever believe you are | | | | like you and I get cars for thousands below |
| screwing the dealership or the individual car | | | | invoice and/or below MSRP. |
| salesman out of their fair profit. | | | | So How Do You Use The MSRP To Determine |
| ...More on that later. | | | | The Price To Offer The Dealer For Your New |
| Now, there's nothing wrong with any U.S. business | | | | Car? |
| making a profit. Hey, we are a capitalist economy | | | | You don't! You ignore it. You want to negotiate |
| - not socialist or communist. Nonetheless there's | | | | from the dealer's cost up, and NOT from the |
| still lots of room for you to save big bucks on | | | | MSRP price down. Fortunately for you there is a |
| your next new car purchase while the | | | | formula developed to step you through the |
| manufacturer and dealership get a very good | | | | process of figuring an offer that has a great |
| profit anyway. In any case, the auto industry | | | | chance at being accepted. An offer that is a |
| makes vehicle pricing so complex that you'll need | | | | "win-win" deal for you and the dealer. When the |
| to do a little online research to be able to save | | | | dealer realizes you've done your homework, he |
| that money. And reading this article is a good | | | | will allow you in the driver's seat. |
| start. | | | | |