Car Invoice Vs. MSRP

by Mary Jane Freeman

When purchasing a vehicle, you want to get the best deal possible, which means understanding the difference between a vehicle's invoice price and manufacturer suggested retail price, or MSRP. The lower of the two will always be the invoice price, which is the price on the invoice that's delivered with the car to the dealership. It's supposed to represent what the dealer paid for the car, but this is not always the case. However, if you purchase your vehicle within $250 of invoice price, you likely got a good deal.

Price Listed on Invoice May Not Be Accurate

Theoretically, a vehicle's invoice price, also known as dealer cost, is the amount a dealer paid the manufacturer for the vehicle. However, this price isn't set in stone and can actually be lower than what appears on the invoice delivered with the car to the dealership. For example, the manufacturer may agree to sell the dealer a particular vehicle model at $500 below invoice if he agrees to buy 100 models from the manufacturer. A manufacturer may also sell a vehicle below invoice if it is not selling well, either regionally, nationally or at a particular dealership, or the model is from the previous year. Finally, a manufacturer may also provide money to the dealer to cover such things as advertising and overhead expenses, offsetting the sale price to bring it below invoice.

MSRP is a Guide Only

The manufacturer suggested retail price is exactly that -- a suggestion. The MSRP is what the manufacturer thinks the car should be sold for in the marketplace, and is usually thousands more than the invoice price. The MSRP is displayed on the car and what potential car buyers see when inspecting a dealership's inventory. The dealer, however, is not required to sell a vehicle at this price.

About the Author

Based on the West Coast, Mary Jane Freeman has been writing professionally since 1994, specializing in the topics of business and law. Freeman's work has appeared in a variety of publications, including LegalZoom, Essence, Reuters and Chicago Sun-Times. Freeman holds a Master of Science in public policy and management and Juris Doctor. Freeman is self-employed and works as a policy analyst and legal consultant.

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