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Common car pricing concepts

September 18, 2010 by - Automotive Editor

Understand more on how new cars are priced. Concepts include invoice price, MSRP, sticker price and fees.

Car Pricing

 

Car pricing is usually confusing. Even the most experienced buyer sometimes gets lost of the different concept used in car pricing. It is at this point where car dealers usually take advantage of the buyer’s lack of proper information. In order to help car buyers understand the most concepts in car pricing, some of these are explained in this article.

1. Invoice price

The invoice price of the vehicle is the amount that the dealer pays to the car manufacturer when the car is sold. This price paid by car dealers to the auto manufacturers might even be lower due to bonuses and incentives. These incentives and bonuses are usually granted by the manufacturers to boost the profit of the dealer. Due to these incentives dealers are actually earning profits even though they sold a particular vehicle on its invoice price.

2. MSRP

The commonly used MSRP stands for the Manufacturer Suggested retail Price. This is the price of the vehicle minus the taxes, registration, and other miscellaneous fees. This is usually found on the sticker price of the vehicle placed on the windshield. When this is written on the sticker price, it is labelled as the base price.

3. Sticker Price

The sticker price is the amount printed on the sticker, usually placed on the car’s windshield. This reflects the base price and the other fees charged to the vehicle except the taxes and tags.

4. Extra fees

These fees are the non-negotiable amount placed on the vehicle’s selling price by the time it is sold. Extra fees are most of the time composed of the taxes, the car registration fees, and the destination charges.

There are also car dealers that inflate the extra fees by placing other amounts such as the processing fees and other unnecessary warranties. Buyers should carefully examine the breakdown of these fees because many car dealers inflate this to earn larger profits.

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