How much should I pay for my new car?

2015 Dodge Challenger R/T Plus

Are you thinking about getting a new car? Fortunately as a consumer, you have many resources that you can consult to help you get to a price that is fair for both you and the dealer you are purchasing the car from. Hopefully this article will serve as a useful tool! Let us explain four different vehicle pricing tools you’ll find online:

MSRP: A Starting Place

The MSRP (Manufacturer’s Suggested Retail Price) is set by the manufacturer. By law, this price is displayed on every vehicle up for sale in the United States. Does anybody actually pay MSRP? Not often but it can happen. For example, where demand is higher than supply, buyers have been known to pay above the MRSP. Here is one occasion when that happened: when the Chrysler PT Cruiser first became available, they demanded prices well above MSRP. This happened with the Dodge Viper sports car as well. While looking to negotiate, many potential car buyers start with the MSRP.

The Dealer’s Invoice explains that the Dealer’s Invoice price is how much the dealer pays for the vehicle itself from its manufacturer. Knowing the dealer invoice price can be a helpful bargaining resource, but it does not tell the entire story; it does not include any of the dealership’s costs for “keeping the lights on”; things like advertising fees, vehicle prepping, sales expenses, displaying or dealer-financing of the car. What may reduce the raw manufacturer’s price below the invoice are manufacturer’s “holdbacks” and incentives.

Dealership Markup

The “average dealership markup” is what the dealer is asking for the vehicle over what they paid for the vehicle–the dealer invoice. On most vehicles it is less than 10 percent. Compare that margin to other industries and you would find it to be quite low. The truth is, which is not popular opinion, dealers actually don’t make much money on new cars. Dealers make most of their money on service and parts and by selling used cars. We suggest that you be sensitive to to average dealer markup if you would like a local dealership stay in business, because their workers–like yourself–need to make a living!

FPP: Fair Purchase Price

A very reliable and quite new resource available to vehicle buyers is the Fair Purchase Price (FPP). Based on clearly identified make and model vehicles, FPP pricing reports tell you a new vehicle’s average selling price, it’s typical range of selling prices, and applicable market conditions. You should know that the FPP is actually not a number influenced by dealers or manufacturers — it is real transaction data. It’s almost like the stock market, changing over time and reflecting on real market transactions. The Fair Purchase Price has become an invaluable resource for those exploring vehicle pricing.


You will now likely make a great decision about what to pay for a vehicle that will work for you after learning these facts about purchasing a vehicle. Now you are ready to do some research, decide for sure what you would like, and then make a deal!

Article Source: Bob Pulte


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