How to read a car price sticker
Many of us have gone to a car dealership interested in purchasing a car only to rub our heads in confusion when studying the car price sticker. With their many codes and acronyms, car price stickers often provide more confusion than information. Here are a few translations of some of the things you might find on a car price sticker.
Manufacturer's Suggested Retail Price (MSRP)
Automobile manufacturers decide on the set retail price on each model, each option and each variation. Combined, these become the MSRP. This can change from year to year for the same models and even change during the year. This price becomes the sticker price. The "S" is for suggested – the dealer can charge more or less if he/she wants to.
Destination Charge – Price of the transport and preparation.
Distributor/Dealer Installed Option Charge – These are not part of MSRP but are included in the price you'll pay. This charge can include an upgraded audio system, luggage rack, mud flaps and other options.
Extended Service Contracts – This includes undercoating, paint sealant, upholstery treatments, etc. Usually these are of little value to the consumer and some dealerships use this sticker as a way to tack on additional charges to recover advertising expenses or ADP – additional dealer profit or MVA – market value adjustment. Both of these charges are simply dealer-invented profit makers. Dealers may also use "Currency Valuation Fee" and "Import Tariff" to increase their profit margin.
Invoice Price – Dealers are individual businesses and therefore price things to make money. "Factory Invoice Price" or "Dealer Invoice Price" is the price the dealer pays the manufacturer for the vehicle. All dealers pay the same price for the same vehicle but other factors determine the final price.
Dealer Costs – Dealers usually have to pay regional or national group advertising fees (for newspaper and TV ads) and interest on loans used to purchase vehicles from the manufacturer. They also have to pay the costs of running a business: employee salaries, rent, utilities, taxes, etc. and they attempt to recoup this money through dealer costs.
Factory Assistance to Dealers – Manufacturers give dealers special fees, rebates, bonuses to reduce costs and increase profit potential. "Holdback" is a rebate that is usually a small percentage (1-2 percent) a dealer receives only after the vehicle is sold. Technically this is compensation for the costs the dealer incurs while the vehicle sits on the lot. The quicker the vehicle is sold, the greater the rebate.
Factory Rebate – Dealers can choose to pass this onto their customers or not. Rebates are especially common at the end of a model year. These types of rebates are what allow a dealer to sell a car for less than the invoice price. Dealers may not list this information on the sticker price so they can pull the ace out of their back pocket and offer you a "great" deal.
Knowing what's included in the price of a car will help you read a car price sticker and know what charges are mandatory and which are not; all of which will allow you to get the best price on your purchase.