Introduction
Invoice price, also known as the Manufacturer’s Suggested Retail Price (MSRP), is the amount that a manufacturer suggests a retailer sell a product for. It is different from the actual price that a consumer pays for a product, as it does not include any additional costs such as taxes, shipping, or dealer fees.
Understanding Invoice Price
Invoice price is the price that a manufacturer sets for their products when selling them to retailers. This price serves as a baseline for retailers to determine how much they should sell the product for to make a profit. Retailers can use the invoice price to negotiate better deals with manufacturers or distributors.
Examples
For example, if a manufacturer sets an invoice price of $50 for a product, a retailer may decide to sell the product for $70 to make a profit. The $20 difference between the invoice price and the retail price covers the retailer’s costs and allows them to make a profit.
Case Studies
One common example of invoice price is in the automotive industry. Car manufacturers set invoice prices for their vehicles, which dealers then use to determine how much they should sell the cars for. Dealers may offer discounts or promotions to customers by reducing the markup over the invoice price.
Statistics
According to a survey by Kelley Blue Book, the average transaction price of a new car in the United States was $37,185 in January 2021, while the average manufacturer’s suggested retail price was $39,316. This shows that dealers are often able to negotiate prices below the MSRP based on the invoice price set by the manufacturer.
