How MSRP Affects a Pre-owned Vehicle Purchase
Written by DriveAxis.ca August 09, 2023
Canadian car buyers, fasten your seatbelts as we examine what role the Manufacturer's Suggested Retail Price (MSRP) plays when it comes time to buy a pre-owned car, if any. We'll decipher how the MSRP, though seemingly unrelated to this particular sector of the automobile market, can still have indirect effects that most buyers aren’t really aware of.
Before we embark on this investigation, let's first dispel the notion that the MSRP wields the same scepter over used pre-owned cars that it does over a brand new set of wheels that arrived fresh off the assembly line. The MSRP is more akin to a star's gravitational pull - it affects nearby objects, without affecting the entire galaxy at the same time.
WHAT IS THE MSRP, ANYWAYS?
The MSRP, that lofty number commonly affixed to the windows of new car models on a dealership lot, is akin to a proclamation of what the maker believes a particular car is worth. It's an idealistic declaration based on a multitude of factors such as part and assembly costs, shipping, and the influence of the current economic state, but as you've likely noticed, once a car leaves the dealership and hits the asphalt, depreciation kicks in. From that moment onwards, the impact of that original MSRP becomes tenuous at best.
From that point on, the MSRP acts as more of a reference guide, as opposed to a central component of the car buying process. As time marches on, conditions fluctuate, and the state of a newly minted car will change by the time it’s ready for resale. Some cars weather the storm of time quite well, emerging with plenty of value still intact, thanks to responsible owners who put forth the effort to maintain them. Others may simply get dinged by shifts in the marketplace, the economy, or overall buying culture, through no fault of their own. Whatever the scenario, the MSRP will still have trickle-down effects on a pre-owned sale.
MSRP VS. DEPRECIATION
Imagine, if you will, a gleaming luxury sedan fresh from the factory, adorned with all the technological bells and whistles one could dream of, boasting a price tag the manufacturer believes best befits its value. Now, fast-forward a few years to the point where that car has gracefully aged like a fine wine, or alternatively, a well-worn map. Now, the value of the car has either taken a hit that would make a prizefighter envious, or managed to bob and weave well enough to absorb a glancing jab on the chin. Either way, this is depreciation in full effect.
Here's where the MSRP still has some of that aforementioned gravitational force. When shopping around for a pre-owned car, you might be tempted to check the original MSRP as a means to get some sort of idea of what you’re paying now, versus what you would have paid if you bought it brand new off the dealership lot. However, the MSRP of yore is just one star in a constellation of factors that influence the used car's price.
THE EFFECTS OF MSRP ON A PRE-OWNED VEHICLE
Behold, the variables that truly sway the scales of used car value - the onward march of time, the steady accumulation of miles, and the state of its overall condition, where regular maintenance spars incessantly with the unavoidable wear and tear. As we sail these tumultuous seas of supply and demand, remember that the market dictates the worth of a pre-owned vehicle. Factors beyond the MSRP play a symphony of influence, such as the allure of the make and model, the geographic winds that carry regional preferences, and the ebbs and flows of consumer sentiment. Here, the MSRP is a supporting actor, not the lead.
When choosing a pre-owned vehicle, the MSRP can help you make a final decision, particularly if you’re wrestling with the idea of buying the newest model, versus one that is a few years old. For instance, if the MSRP of the latest 2023 car model seems disturbingly high in comparison to the 2020 version - despite the fact that both carry essentially the same features - you’ll have your answer. That doesn’t necessarily mean that the 2023 version has been overpriced by the dealership, but it could mean that global economic conditions and the overall state of the new car market is having an indirect effect on the sticker price.
MSRP AND NEGOTIATION
When shopping for a pre-owned vehicle, try to focus less on the original MSRP, and more on the age, mileage and maintenance records, which are essentially a trail of breadcrumbs leading backwards through the car's lifespan. From there, you’ll have a better understanding of the vehicle itself, as opposed to the original MSRP.
Both dealer and buyer can then negotiate based on all these factors, instead of just one. Here at DriveAxis, we keep tabs on the original MSRP of each vehicle in our inventory, but we put the bulk of our focus on making sure that every model is running its best at all times. Quality control is a must, and we back this up with a rigorous and thorough inspection process to make sure that, regardless of original MSRP, buyers are getting their money’s worth, and then some.
So, fellow Canadian drivers and car enthusiasts, always remember that while the MSRP is an influential factor even when buying a pre-owned car, it really boils down to the gravitational forces of time, condition, and market demand that dictate a pre-owned vehicle's pricing trajectory. If you’re still feeling uncertain about navigating these waters with clarity, we’re here to help.
DriveAxis will help you choose the best car that suits your needs, lifestyle and family, and we’ll help you compare several models before you settle on the one you like the most. Worried about financing approval? Don’t be. DriveAxis handles that particular part of the buying process in-house, and we guarantee approval regardless of credit history or current score. Contact us today to learn more!