Let's talk about a fascinating aspect of the car-buying process: the Manufacturer's Suggested Retail Price, or MSRP. This seemingly archaic concept, rooted in a 1958 law, continues to shape how we negotiate car prices today. It's a reminder of how the past can influence the present, and how we can use this knowledge to our advantage.
The History and Significance of MSRP
The MSRP is a relic from a time when Congress took a stand against unscrupulous car manufacturers and dealers. Senator Almer Stillwell Monroney, an Oklahoma Democrat, led the charge with the Automobile Information Disclosure Act of 1958. This act mandated that car manufacturers suggest a retail price, which is now known as the MSRP.
What's intriguing is the 'S' in MSRP, which stands for 'suggested'. By law, this is the price the manufacturer suggests the car should sell for, but it's not set in stone. It's a suggested price with room for negotiation, and that's where the fun begins.
Negotiating Below MSRP
When you walk into a car dealership, you're not just looking at a sticker price. You're looking at a suggested price with padding for the dealer's profit. The dealer pays an invoice price, and your goal is to negotiate a price that's above their invoice but below the MSRP. It's a delicate dance, and one that can save you a significant amount of money.
Tools for Negotiation
So, how do you know what a fair price is? That's where tools like Truecar.com come in. This transaction-based database provides a live index of what cars are actually selling for. It gives you a snapshot of what others are paying in your area, which you can use as leverage during negotiations. For example, we found a Ford Mustang Mach-E with a savings of $2,361 off the MSRP.
Beyond New Cars: Used Car Shopping
The same principles apply when shopping for used cars. Websites like Edmunds and CarGurus offer insights into the average selling prices of most models. They grade sale prices on a scale, helping you understand if a car is a great deal, good value, fair, high, or overpriced. CarGurus, for instance, tracks data at a granular level, considering factors like mileage and trim.
The Myth of MSRP
Here's the kicker: MSRP is often a mythical figure. Most people don't pay the MSRP; they pay the average price at which the car is actually selling. Knowing this average price is a powerful tool for negotiation, whether you're buying new or used.
Final Thoughts
In my opinion, understanding the history and nuances of MSRP is crucial for any car buyer. It empowers you to negotiate confidently and potentially save thousands. So, the next time you're car shopping, remember the wisdom of Senator Monroney and the power of suggestion!
