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New car pricing explained

By WhichCar Staff, 13 Jan 2020 Car Advice

New car pricing explained

It's important to know how new cars are priced before you visit the showroom

You read a review about a car that’s priced at $22,000 and rock up to the dealership to find it’s actually $25,800. So what’s going on? Here’s a quick guide to pricing categories and costs to help avoid some confusion when buying a new car.

Recommended Retail pricing (RRP)

Also called Manufacturer’s Suggested Retail Price (MSRP), this is the price set by the vehicle manufacturer. This is generally less than its drive-away price, though you’ll sometimes see special deals where cars are being sold for less than retail.

WhichCar network usually refers to RRP as it’s a set price that doesn’t vary based on location or dealer incentives.

Drive-Away Price

This is the price of the car that includes the RRP and on-road costs (see below). Some manufacturers are now offering standardised national on-road pricing which is often not much more than the retail price.

On-Road Costs

Cars are different to most other items in that their retail price isn’t what you pay at the counter. In most cases you’ll add on-road costs to the RRP, which include things like stamp duty, registration, compulsory third-party insurance (CTP) and dealer delivery fees. If a dealer is offering you ‘no on-road costs’, or a ‘drive-away price’ then your on-roads are covered.

Dealer Delivery Fees

Most dealerships add delivery fees, otherwise known as preparation fees or destination costs, to their list of on-road costs. These cover the cost of getting the car to the dealership and ready for the customer through checks, washing, etc. This can vary by thousands of dollars depending on the profit margin, so attack them first of you’re looking to negotiate a cheaper price.  

READ MORE: Car-buying glossary of terms