New Car MSRP vs. Invoice: Which Price Should You Pay? |

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Car Buying Tips

Everything you need to know about buying a new car

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Fast Facts

  1. Because cars are becoming so expensive, some auto experts predict that within twenty years, everyone will be leasing their cars.
  2. Leasing will allow you to drive a more expensive car for the price of a less expensive car that you would buy.

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MSRP Vs. Invoice

Which price do I pay?

Knowing the price you should pay for your new car is considered the most important aspect of the new car buying process. Different price points like MSRP, invoice and sticker pricing are all thrown into the conversation when researching and negotiating your new car price. What you really want to know is, how are they different and what do they mean to you? Today's new car buyers would be surprised to discover that the MSRP or invoice price isn't always the most accurate price for your new car. Your best price is what's known as the market price, but we'll get to that in a moment.

First, it's important to understand what MSRP and invoice pricing actually mean. MSRP stands for Manufacturers Suggested Retail Price. The manufacturer cannot set the price at which dealers sell their cars - they can only suggest a price. The MSRP includes standard equipment plus any factory-installed options. The MSRP is listed on a sticker, which is posted on the car. This "sticker price" also details any dealer-installed options, prep fees and markup.

In contrast, the invoice price refers to what the dealer actually pays the manufacturer for the new car. However, that's not necessarily what the dealer pays. Sometimes, the manufacturer provides a discount off the invoice price to help the dealer sell the car. This depends on the popularity of the vehicle as well as supply and demand for that new car. The dealer has overhead costs to consider and simply keeping a specific car on the dealership floor costs the dealer money.

Now that you know what MSRP, invoice and sticker prices mean, you'll want to know which price you should pay. Easier said than done, right? Actually, MSRP, invoice and sticker price are not the prices you should research — those numbers are not too hard to find. What you'll need to find is the market price, which is what others are actually paying for that car in your area. Depending on the popularity of a car, the market price may be higher than MSRP, or even lower than invoice.

So you're probably asking, "Where can I find the market price for my new car?" Lucky for you, makes finding MSRP, invoice and market pricing easy and stress-free. Our friends at put together something called a "Smart Target Price," which takes into account invoice price, MSRP, marketplace demand, and availability to figure out a good target price to aim for when you are negotiating. This way, you'll know what you should be paying for your new car which is, as we said before, the key to getting a great deal.