Question: How much below MSRP is a good deal?
Answer: There’s no specific amount below the manufacturer’s suggested retail price (MSRP) on a new car that makes it a good deal—generally, the lower, the better!
But don’t focus too much on the MSRP. Make sure you understand the bigger picture of how car pricing works.
Car dealers purchase brand-new cars from manufacturers for an amount known as the “invoice price” or “dealer cost.” Manufacturers suggest an even higher price—the MSRP—for which dealers should sell the cars to the general public. The MSRP is usually about three to eight percent higher than the invoice price.
MSRP is a well-known term. It’s sometimes called the “sticker price” or the “window price,” because federal law requires that any new light vehicle for sale must have this figure posted on its window, along with details like its estimated annual fuel cost and a list of optional equipment that’s installed. Window stickers are sometimes called “Monroney labels” after the late Oklahoma senator Almer Stillwell “Mike” Monroney, who sponsored the 1958 law requiring them, in an effort to provide transparency in automobile pricing.
However, dealers can sell cars for any price they choose. They may seek well above MSRP for vehicles that are in demand or settle for less than MSRP for unpopular cars. (Side note: Used vehicles are federally required to have Buyers Guide stickers, with information about warranties, rather than Monroney labels.)
As a buyer, consider starting with an offer close to the invoice price. This won’t be listed on the window sticker, but you can find it online—websites like Edmunds.com specialize in car-pricing data—or you can ask the salesperson to print out the invoice.
However, dealers often acquire cars for less than the invoice price because manufacturers give them rebates or other incentives. A salesperson might suggest that the invoice price is the lowest price for which the car can be sold, when in reality, the dealership has more room to negotiate.
Tips for getting a good deal on a car
To get a good deal on a new car:
- Determine your budget. Keep in mind that your total, “out-the-door” price will include taxes and fees, plus the costs of financing (if needed). You’ll also have ongoing expenses, such as car insurance, fuel, and maintenance.
- Go on test drives, and pick the vehicle you want—its make, model, and year, as well as its trim level and options. Get quotes from multiple dealers for that exact car.
- When you’re ready to purchase, start with a low offer and negotiate upward toward the MSRP. “Putting in an offer that’s three to five percent higher than the invoice price is typically fair,” according to Car and Driver.
- Be aware that supply and demand can have a huge effect on prices, and adjust your offer accordingly. For example, during the coronavirus pandemic, when the supply of cars was constrained, it became common for buyers to pay MSRP or more. The average transaction price for a new car in the U.S. was pushed to a peak of $49,918 in December 2022, but that figure has decreased as supply has increased.
Deirdra Funcheon is a journalist with a master\\\’s degree from Boston University and more than 20 years of experience covering a broad range of topics. She has worked at Univision (on the investigative team at Fusion), Axios (where she covered Miami-area news) and Bisnow (covering the commercial real estate industry). At Jerry, she aims to empower drivers with knowledge about how their vehicles work and how best to handle repairs, insurance and other complications of car ownership.
Alice Holbrook is an editor with more than a decade of experience covering personal finance, including car insurance. She\’s passionate about creating easy-to-understand content that demystifies intimidating topics for readers. Previously, she worked for NerdWallet, and her work has been featured by Newsweek, The Washington Post and the Associated Press, among others.
