And, Who is Monroney?
The MSRP or Manufacturer’s Suggested Retail Price is the sum the maker of a product believes represents its value expressed in dollars. In the automobile world, the MSRP is the price that is printed on a new car’s window sticker.
You might think the sticker price reflects the materials, the labor, and the design efforts that went into the production of the car. As it turns out, the MSRP is a fairly arbitrary number set by the manufacturer to maximize the return on the investment. It creates the illusion of quality and value. So what is it about this MSRP that casts such magic over car buyers? Few challenges create so much satisfaction as buying a vehicle for thousands under sticker price. Why is that?
Well, the MSRP had its genesis in the Automobile Information Disclosure Act of 1958, sponsored by Oklahoma Senator, Almer Stillwell "Mike" Monroney. Monroney believed that the population booming with young children and war veterans required some consumer protection. Thus was created the MSRP. The legislation said that all new vehicles must clearly display on a window a sticker stating the make and model of the car, details of the drive train, the base model features, any options and their costs, and the MSRP. (In 1978, the “Monroney Sticker” was modified to list a vehicle’s fuel efficiency, both highway and city miles per gallon, as determined by the Environmental Protection Agency, and any resulting gas guzzler tax. In 2007, crash test data was also posted on the window sticker, next to the MSRP.)
The MSPR established a price from which the buyer and seller may begin negotiations. Given that bulk rates and wholesale purchasing mean that each dealer receives the same car at a different price, the MSRP established a uniform price for a uniform product throughout the United States. Before the MSRP, dealers charged as much as they could, regardless of buyer or model. The buyer had no reference point, until the MSRP came along, to rein in wanton sales people capable of anything to achieve maximum profit. Now a well-optioned Ford Fusion in Arkansas carries the same MSRP as a well-optioned Ford Fusion in Oregon. The same goes for GM cars, cars from Chrysler, vehicles from Europe, and vehicles from Asia. The actual price buyers will pay for similarly marked cars will probably be drastically different, but the bargaining will begin from the same starting point, the MSRP.
Some saw the universal pricing structure as an infringement on free trade, but since the MSRP presents a suggested price, it violates no commerce laws. Still, the MSRP may be manipulated to astronomical levels in order to create the illusion that the actual selling price nets a huge savings.
Persons are certainly free to buy a vehicle for the MSRP. No car dealer will every refuse top dollar, but the MSRP lists the price of the car only; any taxes, registration fees, and dealer fees are extra.