Car Invoice Price vs. MSRP

• The invoice price is what the dealership pays the manufacturer, while the MSRP (Manufacturer's Suggested Retail Price) is the recommended selling price to consumers.
• Knowing both prices can provide leverage in negotiations, aiming to pay between the invoice price and MSRP.
• Neither price includes additional fees such as destination charges, taxes, or registration, which can affect the final purchase cost.

The invoice price is the amount dealerships pay the automotive manufacturer for an individual vehicle. You can find the invoice price online or by asking the dealership to share it. In many cases, it’s harder to locate the invoice price than the MSRP, which is often listed on the automotive brand’s website. 

Potential buyers should attempt to determine the factory invoice price to gauge how much wiggle room their negotiations have. Knowing how much the dealership paid for the vehicle (on paper) and comparing that to the sticker price can inform your negotiations for the better. However, obtaining the invoice price is only part of the puzzle. Remember that the invoice price doesn’t include additional destination, registration, taxes and titling, or advertising fees. 

The invoice price listed doesn’t include dealer holdbacks, rebates, or any available dealer incentives. For example, the listed invoice price may be $20,000 for a vehicle, but the dealer holdback could be $2,000. Albeit simplistic accounting, that would mean the dealership only paid $18,000 for the car. If the sticker price showed $24,000, you’d have $6,000 worth of wiggle room to negotiate against. 

Can you negotiate the invoice price?

Negotiating the invoice price is somewhat of a misnomer because it’s highly likely you won’t ever know the actual deal that occurred between the car dealers and the manufacturer in transacting the vehicle. However, you can incorporate the invoice price into your negotiations by using it as a starting point and haggling the price down. In any negotiation, especially car shopping, the bottom line is that it’s all about what knowledge you can use to your advantage, and the invoice price is invaluable. 

MSRP stands for the manufacturer’s suggested retail pricing, which is a fancy way of reflecting how much the manufacturer suggests the dealership ask for the vehicle. Automakers determine the MSRP based on several factors, including what price competitors have set, what features are available on the particular vehicle, and how much it costs to produce that model. In addition to standing as a recommendation for sales pricing, a car’s MSRP can also be used elsewhere to determine the vehicle’s value, such as in the event of a car insurance claim. 

Similar to knowing the best time to buy a car, recognizing how a vehicle’s suggested price comes into play can prove helpful. Dealerships can sell above or below the MSRP, but the recommended value must appear on the sticker placed in the car’s window when it’s sold for the first time. This sticker is known as the Monroney sticker and is federally mandated. However, dealerships can charge over MSRP based on market conditions, such as during the pandemic when market adjustments pushed used car prices sky-high because they were in high demand. 

Is MSRP the final price?

The MSRP isn’t the final price, although the two can be close in number depending on negotiations. For some buyers, getting a car close to MSRP can feel like a win, but for others, negotiations are only successful when that number falls below the MSRP. The fees and add-ons associated with buying a car alone can drive the final price up by several thousand dollars. 

Can you negotiate the MSRP?

A car’s MSRP isn’t typically negotiable because it’s more of a benchmark than a goalpost. For example, dealerships may charge $1,000 more than MSRP for a four-wheel drive vehicle in a snowy state. That’s a market condition upcharge that you can negotiate down below the MSRP. However, a vehicle’s MSRP remains the same as it ages. 

Dealer invoice pricing can be much lower than the MSRP, potentially up to 20% or more. Invoice pricing gives the dealership wiggle room (i.e., their profit margin) but also represents the markup built into car sales. Manufacturers often set the MSRP and determine the appropriate invoice price, but it varies based on business practices. 

High MSRP on new vehicles can have you asking when will car prices drop. However, even invoice pricing for newer vehicles has gone up as technological advancements push the average new car price to nearly $50,000. Ideally, paying somewhere between the invoice price and the MSRP can help you get a good deal. Yet, even with the best negotiation skills, you could still walk out of the dealership paying more than MSRP but having haggled for the best price possible. 

Besides invoice pricing and MSRP, you might encounter several other types of pricing, including the following: 

• Fair market value/market value: Unlike the MSRP or sticker price, the fair market value represents what a buyer would potentially pay for a vehicle in the real world, or a “fair market.” Cars tend to have lower fair market values than MSRPs, but a fair price can vary nationwide. 
• Wholesale price: When dealers buy used cars at auction, they pay what’s known as wholesale price. Typically much lower than the original invoice cost, the wholesale price represents the dealer cost, or stake the dealer has in the car.  
• Destination charge: The fee associated with delivering the vehicle to the dealership, sometimes referred to as a “dealership fee” or “dealer handling fee.” 
• Out-the-door price: Totals how much you paid for the vehicle, including taxes, titling, registration, dealer fees, and delivery charges. 
• Window sticker/sticker price: The price listed on the vehicle window, whether the windshield or a side window. 
• Blue book: Refers to Kelley Blue Book’s valuing of the vehicle based on several factors, including make, model, model year, mileage, color, features, and condition.

Ultimately, the final price on the contract you sign is one of the most critical numbers you should pay attention to during the car buying process, if not the most. You're coming out ahead of the game if you understand what you’re paying for a vehicle and how it breaks down into various surcharges. Then, you can shift your focus to meeting your monthly payment obligation and eventually paying off your loan if you choose to finance it.