This is part of our Car Buyer’s Glossary series which details all the terms you need to know whether you’re buying a new or used car from a dealership.
What is the difference between the MSRP and an endorsement sticker?
Excellent question. From a car buyer’s perspective, none of these things should be a factor in any of your negotiations. The Manufacturer’s Suggested Retail Price is technically what a manufacturer thinks a dealership should charge for a vehicle, but as you well know, in the real world, cars sell for whatever a buyer can get from a dealer. Whether it is well below or well above MSRP is down to supply and demand, as well as the bargaining skills of the buyer.
With that in mind, the dealership addendum sticker is something the dealership adds, usually alongside the Monroney sticker that lists the MSRP, destination charges, and other useful information. The addendum indicates the parts or services that the dealer added to the vehicle before putting it on sale. Parts could be running boards or floor mats, and services could be applying a paint protector or adding a security system. This is also where the reseller will list any markup.
What is a dealer margin?
This is an adjustment to the asking price made by the dealer that either reflects actual demand for a very hot vehicle (or even slightly lukewarm vehicles in the Covid era) or a tactic to move the goalposts in the negociation. Nothing prevents dealers from branding cars, but manufacturers generally frown upon it and may even take various measures to discourage it.
What do you mean by moving the goal posts?
Well, no matter what is actually stated on the addendum sticker, there is no law regarding how much the dealer can charge for a particular item or markup. They could claim that a set of running boards is worth $200,000 if they wanted to (accessories are often a key profit source for dealers and salespeople). The dealer markup can be reasonable or ridiculous. At some level, unless you blindly pay the full price listed on the addendum sticker, it doesn’t matter.
The psychological tactic here is that the higher the starting point for trading, the more likely you are to believe that the price you manage to negotiate is fair. If the dealer’s total profit margin is $5,000 and you tell him $7,000, that seems like a win. But if the actual value of the vehicle is $12,000 less than the dealer’s asking price, based on actual transaction data at your location, you think you got a good deal, but in reality, you just did a lap.
So the dealership addendum is fundamentally wrong?
Well, not really – but it depends. Sounds like a far-fetched answer, but that’s only because dealer add-ons are a deceitful topic. Physical accessories added by the dealer have intrinsic value – that value is what you and the dealer agree on. But some line items on an addendum sticker may be wrong. Charges for washing the car before delivery? The dealership shouldn’t pass it on to you — it’s part of the business! It’s like the dealership charging you for the gas you spend to get to the dealership in the morning.
We can’t tell you what a particular endorsement line item is worth, or if it’s fake, so you’ll need to use common sense here. And remember not to get caught up in haggling over the value of a dealer-added roof rack and ignoring the overall price. If you save $50 on the roof rack but get hosed down for another $2,000 elsewhere in the deal, you’ve been tricked into the exact psychological trick the dealership is counting on.
We’re not saying you can trade every vehicle, no matter how popular, for less than the price listed on the addendum sticker. Some very limited production, high demand cars could legitimately sell for the total of what’s on the addendum including the markup (or, again, cars sold in low supply situations). But your best bet is to do your homework and find a different benchmark to base your negotiations on.
So what price should I offer the dealership?
It’s another Pandora’s box, but the quick answer is that you’ll want to compare dealer invoice prices with actual sales information. You can view and compare invoice prices using Autoblogs Car comparison tool.
You’ll use these values to determine your “participation” number – a price you won’t go over to buy the car. Now, you’ll want to consider the extra gear listed on the addendum, but you can almost certainly ignore the inflated prices listed next to them. Some search sites list prices for factory-installed options, but dealer-installed options are kind of the Wild West—anything goes. So consider all of the circumstances and then use your best judgment to set your budget.
And remember: the car dealership is a business that expects to make a profit, and that’s fair. But there’s no reason you had to pay After what is right. Good luck with your shopping!