How to Read a Window Sticker

As new car sticker prices are rising, buyers are paying record amounts at the dealership and this news is sure to get some consumers even more wary than usual. Car dealerships are a business, and there’s nothing wrong with dealerships making a reasonable profit, but they all suffer a bad reputation thanks to the way some operate. Because of all the variables involved in car buying, it can be tricky to make sure the transaction’s fair for both sides, but if you understand the financial aspects of a deal, it’s easier to keep your new car purchase on track. So, here’s how to interpret a car window price.

The window sticker will appear on each car on the lot, by law. They’re compiled when the vehicle is built, and serve as a checklist of sorts. The sticker provides the make, model, model year, VIN, color, mechanical specs (such as engine, transmission and drivetrain), manufacturer warranty details, EPA fuel economy ratings, and estimated annual fuel costs for average use. If there’s a gas guzzler tax, this will be listed as a price alongside the EPA information. Standard features and equipment (and the corresponding trim level) are listed on the left side of the car sticker price; the car’s optional (but already installed) features and corresponding prices are on the right. Use this information to compare vehicles that you’re interested in – keeping track of all the options can be confusing, so it’s helpful to have the essentials right in front of you.

Of course, the car window price also inlcudes the car’s price, in a couple of different formats, and that’s where car shoppers should focus their attention.

The MSRP is the Manufacturer’s Suggested Retail Price – what a manufacturer expects (or hopes) the car will sell for. Most car buyers walk into a dealership expecting to negotiate to pay less than the MSRP.

The other important figure is the car sticker price. The sticker price breaks down the total cost of the car, including the delivery charge, a non-negotiable fee to cover what the dealer pays to get the car from the manufacturing plant or shipping port to the lot. It’ll also include other costs added on by the dealership. If there’s a big discrepancy between the MSRP and the sticker price, ask for a breakdown of the additional fees in writing. Many of these fees are negotiable.

As you’re deciphering the car’s window sticker, the invoice is one of the key bits of data. The invoice is generally (but not always) what the dealership paid the manufacturer for the car. Car shoppers should assume that they won’t pay less for a car than the dealer did, so, find the invoice price on the car window price and you’ve got a good point to start planning your negotiations.

The car window price is complicated, though, and there are other factors to consider. The Internet has increased transparency when it comes to determining a new car’s sticker price.  It’s easy to find a lot of information that the dealership would prefer to keep secret. Holdback and dealer cash are two terms that are tossed around, and understanding them is helpful in ensuring you’ll get a good deal.

Holdback is a small percentage (usually 2 or 3 percent) of the car’s sticker or invoice price that is given to the dealer after the car is sold. In other words, the dealership pays the manufacturer the invoice price up front (usually by getting a loan for the car), and then when a customer buys the car, the dealership gets the holdback, like a rebate (usually paid back per quarter). Each manufacturer has its own formula and variables for calculating holdbacks (and it’s worth noting that some manufacturers don’t use holdbacks at all). Since the dealership loses money every day a new car sits unsold on the lot (due to financing, overhead and other factors), the holdback is intended to help cover these expenses. You won’t see it mentioned on the window sticker, but it definitely plays a role in interpreting a new car sticker price. Often, the invoice price is inflated to accommodate for the holdback, allowing the dealer to get more financing for the car up front. Car shoppers can usually determine the holdback for a particular car with a few minutes of online research, and it certainly doesn’t hurt to know for a better overall understanding of the car’s price, but since this money is crucial to the dealership’s bottom line, it’s generally not up for negotiation.

Dealer cash is an incentive provided by the manufacturer to the dealer, usually to move a slow-selling car or outgoing model. Knowing about dealer cash is as important as anything else in your negotiations, but like holdbacks, you won’t find it on the window sticker. If you walk into a dealership knowing that there’s dealer cash available for the car you want, it’ll give you an edge in your negotiations. You won’t be emotionally swayed if the salesperson claims he’s taking a huge loss.

Another piece of paper, known as the supplemental sticker, sometimes appears alongside the official window sticker. This paper outlines costs that are added to the price of the car above and beyond the MSRP, as a result of overpriced dealership add-ons such as paint or wheel sealants, interior protection coatings, VIN etching, luggage racks or travel accessories, or aftermarket trims like pinstripes or extra badging. In some cases, dealerships charge more for these accessory packages than you’d pay for the same items at the dealer’s parts counter and installed by the service department. If you’re interested in buying the car but don’t want these features (or if you’re simply annoyed by the whole experience), tell your salesperson that the add-ons are a deterrent from buying the car. Sometimes, they’ll negotiate. If the supplemental sticker includes accessories that you actually want and don’t mind paying for, check the items’ individual prices to ensure you’re not paying a huge and unnecessary markup. Don’t lose sight of your end goal, though, to get the best price on the car you want. Dealerships count on confusing and distracting customers with supplemental sticker negotiations, hoping they’ll forget about the overall new car sticker price. If the dealership refuses to budge on useless features, you might have to walk away from the deal.

As you’re finalizing your purchase, ask for all fees to be disclosed in writing. The only mandatory fees are the car’s agreed-upon purchase price, your local sales tax, and your local registration fee, all of which should be disclosed on the car’s window sticker. Other miscellaneous costs that appear are just to pad the dealership’s bottom line, and should not be tacked on after you’ve verbally agreed to a deal.

It’s tempting to simply scan for the dollar signs as you’re cruising the lot, but the new car window sticker holds a wealth of other useful information.  It’ll help you select a car that suits your needs, and when you understand the terminology and the hidden factors, it’ll help you score your new car at the best possible price.