MONEY OBEDIENCE

Save Money with 2 Rules to Negotiate for a Good Bargain

If you’re in a situation where you are able to negotiate the price of a purchase, you should take advantage of the negotiating opportunity and save money. Usually, you can negotiate on higher priced items like cars and some services like home improvements – some people don’t bother, but I hope you’re aware that it’s possible!

Things get a little complicated when the thing you want to buy has no clearly specified market price, like services you need for the house. For example, you would not want a contractor use bad materials and do shoddy work at your house because you made him agree to a price too low to make the job worth his time. But when you buy a car, or appliances – things for which the quality does not change once you decide exactly what model you want – you want to negotiate, no, you want to negotiate HARD to get the right price.

To negotiate, there are two important rules to follow.

ONE: Do your research in advance. Find out what exact model with what kind of add-ons you want to buy and how the store derives at the retail price it expects you to pay for the car. You want to know the answers to questions like these: What are the dealer mark-ups? What are volume incentives for the dealer? What prices can you find in advertisements or on the Internet? Are there any specials or coupons out there? (One place to start? ConsumerReports.org has car reports available for purchase. They can tell you an awful lot about the model you’re seeking.) Once you have a good idea how a product is priced, set a price you are willing to pay. I usually take a price that I believe allows the dealer and the sales person to make some money, too. I don’t want to be ruthless; I just want to get a good and “fair” price.

TWO: Adopt the right mindset that allows you to walk away. When you start talking to the dealer, make sure that you hint that you can live without this particular car – but you have to mean it! There are so many models and brands out there, I am sure that more than one car fulfills you needs. Even if that’s not true, know that there are a bazillion dealers – so you can get the same car from some other guy/gal! If you are willing to walk away from a deal, you automatically get the stronger bargaining position. Remember that your counterpart, the car dealer, has more incentive to sell you the car since his purpose in life is to sell cars. You, on the other hand, don’t need to buy one particular car if the price is not right – there are plenty of cars in the US of A, and plenty of car dealers. Do this right and the dealer will be more willing to lower the price than you will be willing to raise yours.

Here’s a real-life anecdote that provides further illustration. When we bought our last car, we had to go to three different dealers until we got the price we wanted. Yes, you read it right. My wife and I researched how much this hunk of metal cost to build and how much the dealer markup should be, and before I walked in his door I had a number in my head of what a fair price should be. Using this method, I built up a little history of walking away from quite a few cars that I wanted to get because I could not find a dealer who would agree with my fair price. Guess what? I don’t think my life has taken a turn for the worse just because I have not bought certain cars. I have always gotten over it and I have always found a very good substitute. And I never ever went over my fair price. The lucky guy who knew I meant business (hey, I was honest after all, and I was honest right from the start) was the one who made the sale.

One last thing, when you do get a good price, don’t give it all back by buying into all kinds of silly after-sale deals! Undercarriage protection, extended warranty, special tire treatment, etc. – all these things don’t do you any good. They only let the dealer take away from you some of the money you just negotiated away from him!

Good luck!

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Posted in Budget and Expenses, setting up a budget