Buying a new car can be a headache even if you know what you’re doing. If you don’t, it can be more than just a hassle; you could get ripped off.
Educating yourself is important when buying a new car. While you’re looking into makes and models, extras and safety features, don’t forget the most important thing — price. How much should you pay for your new car?
To start, you should know the difference between MSRP, sticker price, invoice and market value. To get a good deal, what you really want to pay is what other people are paying for the same car, which is the market value.
MSRP, Manufacturers Suggested Retail Value, is what automakers would like dealers to pay for a vehicle, but they can’t make dealer charge that price. The MSRP includes the standard price as well as any factory-installed upgrades such as a navigation system or leather interior.
The MSRP is listed on the sticker, but isn’t really the sticker price. Sticker price also includes any upgrades or mark-ups tacked on by the dealership, which has to pay for overhead.
The invoice is the price the dealership usually pays for the car, but not always. Automakers may provide a discount to the dealership to help move the car, and the price can also be affected by a vehicle’s popularity as well as supply and demand.
Consumers may pay more or less than MSRP depending on a vehicle’s popularity, which finally gets to market value. Determining what other people are paying — market value — used to be more difficult than it is today. Plenty of reliable sources, such as Kelly Blue Book can give you a fair market range to shoot for if you know what you’re looking for.