What is the Difference Between MSRP and Invoice?
🆚 Go to Comparative Table 🆚The main difference between MSRP and invoice price lies in who sets the price and who pays it. Here's a breakdown of the differences:
- MSRP (Manufacturer's Suggested Retail Price): This is the price that the manufacturer recommends for a car, also known as the "sticker price". It includes the base price of the vehicle and any options or packages. However, it does not include optional add-ons that could raise the price of the car. MSRP is just a suggestion, and dealers can sell a car at this suggested price or go higher or lower than the MSRP.
- Invoice Price: This is the amount that the dealer pays the manufacturer for the car. It is also referred to as the dealer price. The invoice price is typically lower than the MSRP. Knowing both the MSRP and the invoice price is important for car shoppers, as it gives them an idea of the dealer's profit margin and helps them negotiate a better deal.
The cost difference between the MSRP and invoice price can vary widely, both proportionally and by dollar amount. The more in-demand a vehicle is in a specific area, the greater the difference between the invoice and the MSRP, since the dealer can charge more. Additionally, manufacturers may offer incentives to dealerships, such as holdbacks or other incentives, which allow dealerships to make money even if they end up selling the vehicle at the invoice price. These incentives are not required to be passed on to the customer, and the dealership can choose whether or not to share these savings with the buyer.
Comparative Table: MSRP vs Invoice
The difference between MSRP and invoice price can significantly impact the price you pay for a vehicle. Here's a table summarizing the key differences between the two:
| Feature | MSRP (Manufacturer's Suggested Retail Price) | Invoice Price |
|---|---|---|
| Definition | The price that the manufacturer recommends the dealer sell the car for, including the manufacturer's profit margin and the dealer's profit margin. | The amount that the dealer pays the manufacturer for the car, including costs of production, sale, distribution, and fair retail price. |
| Purpose | Sets the recommended selling price for the dealer, including the profit margin for both the manufacturer and the dealer. | Represents the actual cost of the car to the dealer, providing insight into the dealer's potential profit. |
| Availability | Easily findable on manufacturer websites and in brochures. | Not as easy to find, but it can be used as a basis for negotiation. |
| Negotiation | Knowing the invoice price allows you to negotiate up rather than starting high at the MSRP, potentially saving you money. | Negotiating at the invoice price level may limit your ability to negotiate further discounts or additional features. |
Understanding the difference between MSRP and invoice price is crucial when buying a new car. While the invoice price is the actual cost of the car to the dealer, the MSRP includes the manufacturer's profit margin and the dealer's profit margin. Knowing both prices can help you negotiate a better deal and potentially save money on your new vehicle purchase.
- Invoice vs Bill
- Receipt vs Invoice
- Invoice vs Tax Invoice
- Invoice vs Statement
- Invoice vs Purchase Order
- Proforma Invoice vs Commercial Invoice
- Factoring vs Invoice Discounting
- Rebate vs Discount
- Margin vs Markup
- Loan vs Lease
- RFI RFP vs RFQ
- Trade Discount vs Cash Discount
- Lease vs License
- Price vs Cost
- Broker vs Dealer
- Profit vs Revenue
- Unit Price vs Unit Cost
- Rental vs Lease
- Accounts Payable vs Accounts Receivable