Invoice price vs. MSRP: what the numbers mean
Updated
The invoice price is what the manufacturer bills the dealer for a car; MSRP is the manufacturer's suggested retail price on the window sticker. Invoice is usually below MSRP, but it is not the dealer's true cost, because programs such as holdback and dealer incentives can lower what the dealer ultimately pays.
The prices on a new car
| Price | What it is |
|---|---|
| MSRP | The manufacturer's suggested retail price, printed on the window sticker. A suggestion, not a fixed price. |
| Invoice price | What the manufacturer bills the dealer for the car. |
| Holdback | An amount some manufacturers pay back to the dealer after the sale, so the dealer's cost ends up below invoice. |
| Dealer incentives | Money manufacturers sometimes pay dealers to move particular models; buyers often never see it. |
| Customer incentives | Rebates or special financing offered to the buyer, which should come off the price you pay. |
| Selling price | What you and the dealer agree. It can be above MSRP, between the two, or below invoice. |
How to use it
Invoice is a useful reference for how much room there is between the sticker and what the dealer paid, but it is not a floor. Where a car sells against that range depends on supply, demand and the incentives running that month. Popular models can sell above MSRP; slow ones can sell below invoice.
Whatever number you negotiate from, the deal is the out-the-door price: a selling price near invoice is no bargain if fees and add-ons take it back. See How to negotiate a car price.
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