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How much below MSRP is a good deal?
How much below the MSRP can I offer to a dealership? I want to put in a good offer for my new car and get a great deal.
Rachel Juillerat · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The manufacturer’s suggested retail price (MSRP) is technically the starting point for negotiations, so any amount below MSRP is a good deal.
Typically, dealers charge about 3–5% over the MSRP—and if the vehicle is in high demand, they may charge more.
To make a solid offer on a new vehicle, take note of the:
- MSRP (sticker price)
- Factory invoice price
- Dealer incentive (if you can find this)
You can calculate the true cost by using this formula: Factory invoice price – ( 3-5% of MSRP + dealer incentive) = true new car cost
Take the true new car cost then add 3-5% of the value to it. This value is what you should offer your dealer.
For example: The sticker price (MSRP) of your dream car is $40,000. The factory invoice price is $38,000. You then need to find 3% of the MSRP, which is $1,200. When you ask the dealer, you learn their incentive is $1,000.
Time to plug the values into the formula: $38,000 - ($1,200 + $1,000) = $35,800.
This means the true new cost is $35,800. You then add 3% of the true new cost to find the total offer, which looks like this: $35,800 + $1,074 = $36,874
Your total offer should be around $36,874. Paying too much more than this will benefit the dealer more than you.
View full answer
- Gregory R.
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