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MSRP Vs. Invoice Price: What’s the Difference?

Posted by Charlie Maniates | Dec 20, 2019

Determining a car’s price can become a confusing task when you start to hear unfamiliar terms like MSRP, sticker price and dealer invoice price. As you engage in the car-buying process, it’s important to understand what these mean, how they compare and the role that each plays in the price that you’ll ultimately be paying for a car.

What Does MSRP Mean?

MSRP stands for “manufacturer’s suggested retail price” and represents the price that a manufacturer recommends a dealership charge for a vehicle (a manufacturer can’t require a dealer to charge a specific amount of money). This price includes all standard features, as well as added options, and is listed on a sticker that’s commonly found on the car’s window. This is where the term “sticker price” comes from, meaning MSRP and sticker price represent the same figure.

What Is a Dealer Invoice Price?

The dealer invoice price, on the other hand, is the amount of money it costs for a dealer to purchase a car from the manufacturer. Dealerships are in the business of making money, so the dealer invoice price is always less than the MSRP. It’s also worth noting that outside factors, such as supply and demand, could affect how much the dealership pays the manufacturer for a car, which directly impacts your ability to negotiate.

Dealerships aren’t required to disclose this figure, but some may show it to you upon request.

So, What Will I Pay for a Car?

While the MSRP is the suggested price for dealerships to charge, the market price of a car is the average amount that people in your area are paying. The market value more closely resembles the amount of money you’ll pay for a car because fluctuates based on local supply and demand. As a result, it could be higher, lower or similar when compared to the MSRP.

Knowing the MSRP, market value price and, if possible, dealer invoice price will help you determine what you might expect to pay for a car and how much you can negotiate with a dealer. As such, you should research these extensively for each vehicle you’re considering before trying to strike a deal.

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