Whether scribbled on the back of a napkin or delivered warm from a laser printer, the initial offer presented to the customer by the salesperson is called the First Pencil.
The more prepared you are before entering the dealership, the greater your chance of scenario one, but even then it is absolutely not guaranteed.
I once went into one car dealership well prepared with a stack of competing offers for various configurations for the dealership to eventually beat, should the initial offer even prove to be at all competitive.
However, that dealership's initial offer proved to be MSRP minus the rebate that the manufacturer was offering.
While superficially it might seem tempting to call out that dealership and shame them, from the perspective of that dealership it would not be shaming them at all.
The strategy of some dealerships is to make a small profit on a large volume of cars.
The strategy of other dealerships is to emphasize gross profit per vehicle over volume.
Regardless of how prepared I was, I was simply sitting in the wrong dealership if I wanted the absolute lowest price.
While their offer was thousands of dollars more than what an informed consumer would pay, from the dealership's sales manager's perspective how would he know I would not agree to pay his above-market price if he did not submit it to me?
From the perspective of an automotive salesperson and the sales manager that he or she reports to, the first pencil may be somewhat like asking out the captain of the cheerleading team or the football team's quarterback.
No guarantee that the customer will say yes, but oooooohhh wouldn't it be wonderful for the salesperson if the answer were in fact yes!!
I did say merely somewhat like because there are some important differences between the first pencil and asking out the captain of either the football or cheerleading teams:
Oral representations such as a free car wash may or may not actually be honored after the sale, and even if they are, their value is quite small relative to the price of even a car that is not merely used but is very used.
Whether the first pencil was hand written or delivered on a crisp laser print out is not what makes a first pencil competitive.
You might have a laser printer at home.
If so, then you are free to use it to print out The Moon is made of Swiss cheese, but that would not make it so.
Whether the customer chooses to respond with ...
... it is not merely OK to say no to the first pencil, but barring a competitive offer, it may in fact be expected.
I would love to close this page by saying having once been handed an offer of MSRP for a vehicle, I have now seen everything and nothing new can ever surprise me.
However, such a naive statement would only suggest that I have even more to learn than I think I do.