For many people, a new car is the second most expensive purchase they'll make during their lifetimes, and it's important to understand how car manufacturers and dealers determine prices, and how to negotiate the best discounts and rebates. There are four main prices that apply to any new car: the invoice price, the base price, the Monroney (mon-ROH-nee) sticker price, and the dealer sticker price. The invoice price is the manufacturer's initial charge to the dealer, including freight charges, but not including any discounts, rebates or incentives the dealer may obtain from the car manufacturer. The base price is the cost of the car without any options, but including standard equipment and the manufacturer's warranty. The Monroney sticker price shows the manufacturer's suggested retail price, or MSRP (M-S-R-P), the manufacturer's transportation charge, and fuel economy information. This sticker must be displayed on new vehicles by federal law. The dealer sticker price shows the price including any dealer-installed options. The dealer's profit is generally based on the difference between the invoice price and the MSRP. This markup is usually between 10 and 20 percent, and it's within this range that you may be able to negotiate a discount or rebate from the dealer. If you're financing your new car, dealers sometimes offer favorable rates on specific cars or models. In some cases, dealers offer purchasers the choice of a low interest rate or a cash-back option. This latter option is not strictly a rebate, since the consumer is simply borrowing the money from the finance company.
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