Glossary: Manufacturer's Suggested Retail Price (MSRP)

Read time: 2 minutes 

You’ve heard the term “MSRP” — in car commercials, at the dealership, or maybe while getting your own car. 

MSRP is an acronym for manufacturer’s suggested retail price. But what does MSRP mean for you, the consumer? And why is it just a suggestion? 

Table of Contents: 

What does MSRP mean?
Can you negotiate MSRP?
Keep This in Mind

What does MSRP mean? 

MSRP is the price that car manufacturers recommend retailers use when selling a vehicle. It’s supposed to be determined by a comprehensive assessment of the vehicle’s value, taking into consideration things like production costs, market position, and profit margins. Dealerships don’t have to use this price. However, it’s a key indicator of the vehicle’s market value — and a starting point for negotiation. 

Does MSRP include taxes? 

Unfortunately, MSRP excludes taxes, registration, and other transactional fees. These additional costs are determined by local and state regulations and are added to the final purchase price. 

MSRP also doesn’t include any dealership fees or additional markup on their end.  

Make sure to do your research before you ever step foot into a dealership. Be aware of potential ‘bogus’ fees, and find your intended car’s market value, estimated depreciation, etc., before making a deal. 

Who pays MSRP? 

MSRP is the price manufacturers believe the vehicle is worth on the retail market, typically including a dealership’s profit margin. But to get the vehicle in their inventory, the dealer only pays the invoice price (or dealer’s cost) to the manufacturer. The invoice price is generally lower than MSRP, and that’s where dealers can really start to make a profit. 

Can you negotiate MSRP? 

Almost every car sale can be negotiated. It really comes down to how much you want to duke it out with your dealership.  

Negotiation is most common when a new or used vehicle is purchased. Because the MSRP is a suggestion, dealers are under no obligation to sell the vehicle at or above that price.  

There are a million tricks and tactics to approaching a vehicle sale. But what about negotiating a vehicle lease? 

MSRP and Leasing

MSRP is just as essential when leasing a vehicle as when purchasing one. 

Nearly every lease calculation will use MSRP as a factor — from your monthly payments to your vehicle’s estimated depreciation over the lease term to your lease buyout costs. Achieving a lower overall vehicle cost can lead to more favorable lease terms, with potential savings on your monthly payments and lower buyout prices at the end of your lease. 

So, just as you can negotiate a sale price, you’re welcome to try and negotiate your leased vehicle’s MSRP. This negotiation can be complex, but with the correct information and approach, it is possible to work towards a lease agreement that’s more financially beneficial to you.  

Keep This in Mind  

We’ll be honest – educating yourself about your car’s MSRP probably won’t give you full immunity against the dealership’s attempts to upsell you. But it’s one of the best things you can do to set yourself up for success.  

The more you understand about the multitude of complicated parts and pieces of the auto industry, the more power you give yourself as a consumer. Dealerships like to count on drivers just giving up hope. But we believe in you.    

To continue mastering all things auto leasing and stay prepared for the car market ahead, explore our knowledge center. Learn more, quiz yourself, and check us out at leaseend.com if you want to learn more about a lease buyout and how well it could work for you. You can give us a call at (888) 307-5197, too.

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