Question: On average, how much will a dealer come down on the MSRP?

August 17, 2005

Hello Tony

On average, how much will a dealer come down on the MSRP? 10%, 15%, 20%?

Stephen I.

Answer:

Hi Stephen,

There is no way to accurately calculate an average. There are too many factors that come into play, and too many factors that are constantly in a state of flux.

The biggest factor to consider is the rule of supply and demand. If there is a large demand for a particular model and there is a scarce supply you will see very low discounts, and in some cases dealers asking over MSRP...and getting it! You see this often when certain new models come out.

On the other hand if there is a glut of a particular vehicle on the market naturally you would expect to be able to buy it at or near invoice price.

Of course, right now the American manufacturers are offering the so-called "employee pricing" which is several hundred dollars below invoice depending on the model.

Stephen, even during normal marketing cycles the dealers are lucky if there is 8% to 12% mark-up between dealer invoice price and MSRP.

Rather than calculating what percent a dealer will come off of the MSRP it is more practical to calculate what percent over invoice they will sell for. I would guess that about 3% is average with certain models being higher and others being lower.

There are of course other factors that come into play as well for example, how desperate the car dealer is to turn over his inventory, your ability to negotiate, etc.

I mention on my website and I have seen more than once two people buy identical vehicles from the same dealer, but the person who has done his homework and is prepared will inevitably get a much lower price!

Follow the advice on my website, and when it comes time to buy you will come out just fine.

All my very best...

Tony Iorio