MSRP simply stands for Manufacturer’s Suggested Retail Price. You’ve probably seen the abbreviation MSRP while researching cars in Canada. But what does it really mean? First things first, MSRP isn’t some new-age money neither is it a currency.

Several factors come into play when producing a car. The manufacturing company has a lot of work to do regarding quality, durability, and even price.

Auto dealers do not just sell cars at any rate; every car’s prices are communicated to them by the manufacturers before it is made public.

You will come across several terms when making a car purchase in Canada. Not to worry, these terms are used to classify different aspects of your purchase. Most of these terms can be pretty confusing if you are not in the auto industry know.

The chances are that you’ve come across the acronym MSRP when shopping in Canada. Understanding the term will help you negotiate a better deal when purchasing a car(s). Let’s take a look at what MSRP is in Canada.

What is MSRP?

A Manufacturer’s Suggested Retail Price (MSRP) is the price that the manufacturer of a specific brand suggests to dealers to sell their cars at.

Basically, this is the price that dealers use to fix the prices of vehicles. Usually, the price is higher than the dealer cost, and it is fixed; hence there are no variations per dealer.

When setting an MSRP for a car, the manufacturer usually considers the car’s quality and features.  MSRP simply suggests a price; dealers are not obligated to use this price.

Most dealers often reduce the MSRP to lure potential buyers using what is known as a sticker price. A sticker price is what is displayed on the car.

It is often the actual amount a dealer chooses to sell a vehicle. In some cases, it can be the same price as the MSRP; it can also be higher or lower based on the repayment model and features.

Note that the MSRP of every car differs since all vehicles do not have the exact specifications and model. MSRP comes in handy when trying to evaluate the cost of a vehicle. You can use it to budget how much you want to spend on a car purchase.

You can find the MSRP of a vehicle online through the manufacturer. And since it is compulsory for every dealership to indicate the MSRP, you will always have access to the information when you need it.

Costs Not Included in the MSRP

Although several factors are involved when determining the MSRP for a vehicle, some elements are not included. These factors are left for the dealership to decide. Below are some of the costs not included in the MSRP:

• Sticker Price

A sticker price is the listing price of the car you’ll find at a particular dealership. It is usually within the price range of the MSRP, while sometimes it is not.

However, it does not fall below the cost price of the vehicle. The price usually depends on the car’s features, brand, current marketing value, availability in the market, etc.

A sticker price gives you the chance to negotiate. If you can negotiate a better rate that suits the dealer, then the purchase will be sealed.

• Invoice Price

The invoice price is crucial as it is the amount the dealership paid the manufacturer to purchase the car. Since these cars are not gotten on a repayment plan, the dealer tries to get his/her invoice price and add a little interest.

So, to profit from the sale, the dealer must sell the car at a much higher price than the invoice price. In rare cases where there are no sales, a dealer may sell at the invoice price to get his money back.

• Registration Fees

Registration fees are the amount a dealer pays to own a vehicle legally. These fees are spread across different sub-categories, every dealer is expected to pay.

Once these fees are cleared, a dealer can legally own and operate the vehicle. Note that these fees are different from insurance and extended warranty fees.

• Payment Price

If you take out a car loan, you’ll be subject to a payment price. A payment price is an amount you’re required to pay per your loan agreement.

This payment model can be bi-weekly or monthly. The amount you have to remit depends on the loan’s size, the term, and your down payment. 

• Base Price

The base price is the surface amount of a vehicle; it is the amount paid for that particular car brand and model. It is the first price tag on a car without adding an associated cost or features.

• Sales Price

The sales price is the amount you purchase a vehicle after negotiation. It is pretty different from the MSRP, the sticker, and the invoice price.

Depending on your financial capability, the sales price is the amount you either pay for the car in cash or take out a car loan to possess the vehicle finally. 

Conclusion

Understanding the ins and outs of manufacturer-suggested retail prices for a vehicle will help you better your chance of negotiating a reasonable price. And since the MSRP is suggested, be aware that dealers do not have to use it. You can simply use it to set a budget for your purchase.