Car-Buying Price Terms, Defined

Out-the-door (OTD) price

The complete purchase price before financing: the agreed vehicle price, destination charge, dealer fees, any selected products and applicable government fees such as taxes, title and registration. The FTC describes the out-the-door price as the total price of the car before financing, including taxes and fees.

A complete, itemized OTD quote is the best figure for comparing offers. Ask for it in writing and compare that one number across dealers.

MSRP (Manufacturer's Suggested Retail Price)

The automaker's suggested price for the vehicle, shown on the Monroney window sticker. A dealer may sell the vehicle above or below MSRP. The Monroney window sticker lists the base vehicle price, factory-installed options, destination charge and total sticker price. Taxes, dealer charges and dealer-installed products are not part of that factory-set sticker total. Treat MSRP as a comparison reference, not necessarily the price you will pay.

Destination charge or freight fee

The manufacturer's stated transportation charge for delivering the vehicle to the dealer. Federal law requires this charge to be shown separately on the Monroney window sticker and included in the sticker's total price. Confirm the destination charge appears only once and is not added a second time. Negotiate the overall selling price rather than the destination charge by itself. A separate dealer transfer, shipping or home-delivery charge is different from the manufacturer's destination charge.

Documentation fee (doc fee)

A documentation fee, often called a doc fee, is a dealer-imposed charge for preparing and processing purchase paperwork, such as sales documents, required disclosures and title or registration documents. A doc fee is not a government fee, although state rules may limit how much a dealer can charge or how the fee must be disclosed. Because doc fees vary by state and dealership, compare the full out-the-door price instead of judging the doc fee by itself.

Additional Dealer Markup (ADM) or market adjustment

Additional dealer markup, often called ADM or a market adjustment, is an amount a dealership adds above MSRP. It may appear when a vehicle is in high demand, limited supply or has specific features that make it harder to find. ADM is not a manufacturer charge or government fee. It is set by the dealership.

Because MSRP is a suggested retail price, a dealership may price a vehicle above MSRP, subject to applicable advertising and disclosure rules. Before agreeing to ADM, a buyer can ask whether different pricing is available, compare offers from other dealerships or choose not to move forward.

Junk fees

Junk fees are charges that may appear unclear, unexpected or not worth the cost to the buyer. In car buying, the term is often used for dealer-added products or services such as nitrogen tire fill, VIN etching or paint sealant.

Not every dealer-added product is the same. Some may provide value to certain buyers, while others may not. Review each charge based on how it was disclosed, whether it is optional or required, whether the buyer agreed to it and whether the product or service is worth the added cost.

Add-ons and dealer addendum

Add-ons are products or services added beyond the factory vehicle. A dealer addendum is a separate sticker or document that lists dealer-added items or charges. Add-ons can include factory-installed options shown on the Monroney label, dealer-installed accessories listed separately, optional F&I products such as a service contract or GAP, or packages the dealership includes as part of its disclosed offer.

Optional add-ons should not be charged without the buyer's agreement. If an add-on is optional, confirm the buyer agreed to it before it appears on the contract. Review any dealer addendum separately from the factory MSRP.

Government fees (tax, title, license)

Government fees are charges imposed by a state or local government when a vehicle is purchased. They may include sales or use tax, title fees, registration fees and license plate fees. These fees are based on government rules, not dealership pricing. The amount can vary depending on the buyer's location, the vehicle, the transaction price, registration type and state or local requirements. A dealership often collects and submits these fees on the buyer's behalf, although the exact process can vary by state.

Invoice price

Invoice price is the amount listed on the manufacturer's invoice to the dealership for the vehicle, including certain factory or regional charges. It is often described as the dealer's cost, but it is not always the dealership's final cost. Manufacturer holdback, factory-to-dealer incentives and other credits may reduce the dealership's actual cost below the invoice price. Because those amounts can vary by manufacturer, vehicle, timing and dealership, invoice price should be treated as a reference point, not the full picture of what the dealership paid.

Dealer holdback

Dealer holdback is a manufacturer credit or payment to the dealership. It is often based on a percentage of MSRP or invoice price and varies by manufacturer. Holdback can help offset dealership costs, such as inventory, financing and operations. It is also one reason invoice price may not reflect the dealership's actual net cost. Because holdback varies by brand, timing and program rules, it should not be treated as guaranteed profit on every vehicle.

Monroney sticker

A Monroney sticker is the official factory window sticker required on new vehicles sold in the U.S. It lists the vehicle's MSRP, factory-installed options, destination or transportation charge and total factory sticker price, along with vehicle identification information. Fuel economy and environmental ratings may also appear on the label. The sticker is named for Senator Mike Monroney, who sponsored the 1958 disclosure law.

It must remain on the vehicle until the vehicle is delivered to the buyer. Use the Monroney sticker as the main reference for the manufacturer's VIN-specific factory pricing and equipment. It does not show the dealer's selling price, taxes, registration fees or final out-the-door price.

Manufacturer rebate

A manufacturer rebate is an incentive from the automaker on a specific vehicle, model or buyer program. It may also be called cash back or customer cash. Depending on the offer terms, a rebate may reduce the purchase price, lower the amount financed or be provided as a cash allowance. Because the rebate comes from the manufacturer, it is separate from any dealer discount. It is also not the same as a government tax credit.

Rebates may have eligibility requirements, expiration dates and limits on whether they can be combined with special financing. A rebate is one type of manufacturer incentive. Manufacturer incentive is the broader term and can also include low-APR financing, lease offers and bonuses paid to the dealer.