MSRP and Invoice price do not apply to used cars

dealer invoiceIt’s easy to get confused by car industry jargon.  One mistake I often witness is people mixing up new and used car terms.

For example, I’ve had several people tell me something like,  “I can get this USED car for $3600 below MSRP, sounds like a great deal…right?”

Unfortunately for them, this can be an expensive mistake.  Both MSRP and invoice price only apply to new cars.  As soon as you take the car off the lot, these terms mean nothing.  If you compare the price of a used car to MSRP, you won’t account for mileage, depreciation, and the current market value of the car.

MSRP (Manufacturer’s Suggested Retail Price) is the retail price displayed in the window of all NEW cars.

Invoice Price (or dealer cost) is the amount paid by a car dealer to buy a NEW car from the manufacturer.

What you’ll pay for a new car is usually somewhere between MSRP and invoice (however, you can occasionally buy a car below invoice).  When discussing NEW cars, it’s acceptable to say “I got the car for $300 over invoice” or “I was able to negotiate $1800 below MSRP”.  But never use these terms for USED cars.

Once a car becomes used, the only term you should consider is the car’s market value: how much people pay for a car on average in the used car market.  You can easily lookup market value using Edmunds True Market Value.