What to Know about Car Pricing

Posted on Posted in Auto & Motor

Pricing for new vehicles can get confusing because there are so many levels and items to consider. The invoice price is what the dealership pays the manufacturer for the vehicle. The base price is what the car or truck costs without any optional features added. An example is a new car with no automatic transmission, no sunroof, no sophisticated sound system, or no air conditioning system. The manufacturer suggested retail price, or MSRP, lets the dealer know what the manufacturer believes the car is worth. It is higher than both the invoice and the base price.

Dealers can choose to sell the car for that amount or negotiate with buyers for a different price. Most dealers use that price as a starting point because it leaves them with some flexibility. If a new model is in high demand, the dealer may raise the price above MSRP because they know people will pay extra for that particular vehicle. Other models may be offered at a lower price due to rebates, incentives, or overstock. Another options dealers have is to sell the car at the suggested price and provide add-on benefits free of charge. That can be free servicing for a few years, a gas card for a specific amount, or upgraded tires and other features. The purpose of that is to get the asking price by adding value to the sale. Tune-ups, oil changes, and alignments, for example, typically come out of the pockets of drivers. It may be worth it to many drivers to pay the asking price and save money on maintenance for three years.

Another element to the pricing of cars is space on the dealership lot. If there are too many remaining vehicles from the past year, a clearance sale may be announced to sell cars quickly. The idea is to make room on the lot for new models that are due to arrive soon. It is wise to compare dealership pricing at several locations before making a final purchase. It may take some time and research, but the result can be the exact vehicle desired at the best possible price available. There are some websites that let drivers know what the same type of car has sold for at specific dealerships. The information is useful when discussing price and value with a dealer.