how msrps are determined
because the msrp is set by a product s manufacturer it should remain constant across retailers the msrp is supposed to reflect all the costs incurred over the manufacturing and sales process as well as an average markup by retailers prices are set to allow all parties involved the manufacturer wholesaler and retailer to make a profit from the final sale retailers may frequently charge less than the msrp but the price charged depends on the wholesale cost whether purchased in bulk from the manufacturer or in smaller quantities through a distributor in many instances the msrp is manipulated to an unreasonably high figure retailers do this so they can deceptively advertise a product and list it at a much lower sale price indicating to consumers that they re getting a much better bargain problems with msrpusing suggested pricing methods often falls into direct conflict with competition theory the use of the msrp allows a manufacturer to set the price of a product often higher than usual with the potential for having an adverse effect on consumers and their wallets another suggested pricing method is resale price maintenance rpm where retailers are required to price products at or above a certain level this practice is frowned upon or illegal in many regions of the world 2msrp vs base price vs invoice pricean msrp is a recommended price by a manufacturer although it is intended to give a retailer a margin of profit there is no obligation for retailers to sell a car at the msrp retailers may set their official prices higher or lower than the msrp depending on inventory or market conditions the msrp is different from the invoice price the price that the dealer pays the manufacturer for each car this is typically lower than the msrp allowing the dealer to earn a profit on each sale since the dealer is required to pay the invoice price they will be losing money if they sell to the customer at a lower price the base price represents the cost of a car without any optional features many car models come with additional features such as cruise control internal cameras or optional safety features each of these features represents an additional charge which is added to the base price 