Car Negotiation Coach

For most of us, our salary is the single most important benefit we seek from work.  But sometimes–for tax or other reasons–your employer may be more open to compensating you in other, less-traditional ways.  If your company or boss has indicated they cannot give you a raise, here are some other negotiation points.

1. Retirement Benefits

People don’t go around town bragging about their awesome retirement plan, like they might when it comes to their salaries (not me mind you), but retirement benefits from your job might be the single most important factor in determining your post-work quality of life.   A 401(k) match or something of the like is free money, and a huge benefit to anybody.  Don’t assume a company won’t negotiate your retirement package simply because they have taken salary off the table.  Companies could have a myriad of reasons for preferring to put their extra dollars (or stock) into your retirement fund rather than into your salary.

2. Work/Life Balance Benefits

Your employer may be able to offer you work a more flexible work schedule to accomodate you.  Many people are now working 10 hours per day for 4 days a week rather than the old standard 8 hour 5 day week.  You could also see if working from home one or two days a week is an option.  Just be prepared to actually work in your home office and not treat those days as vacation time.

3. Fringe Benefits

I don’t need to belabor this point: there are as many fringe benefits as the imagination allows.  If you negotiate mileage monies you didn’t previously receive–then that’s still extra money in your pocket.   It’s like in baseball when the announcers say that old cliche: “a walk is as good as a hit.”  Extra money is, for the most part, extra money.  Sure it’s probably not as good as a raise (just like a walk really isn’t as good as a hit in most instances), but whether they classify those additional monies as “mileage” or “salary” shouldn’t really concern you so long as you increase your bottom line.  It should be noted that some fringe benefits–such as increased vacation time–might be even more personally valuable to you than a raise.  Please also note that fringe benefits can range from de minimis (gym membership) to substantial (health insurance).   [...]

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I recently posted about overused negotiation techniques. Today I want to take the opposite approach and highlight some underused negotiation techniques that should be incorporated more often while making a purchase.

When you’re done reading, please comment and identify any negotiation techniques that you believe are underused.

1. The Semi-Low Ball Offer.

Too often, people’s first act in buying a negotiable item is to start with a low-ball offer. These insultingly lowball offers immediately paint you as unreasonable. They also may personally offend the pride of the seller. Although more finesse is involved, it’s more effective to begin with a slightly higher offer. The goal is to create a middle ground that favors your price points.

2. Speaking Highly of the Product or Service.

Again, in many situations sellers are judging you just as you are judging them. Almost everyone takes some pride in their company or product, and this is particularly true when the seller is also the business owner. Although part of negotiating may involve addressing honest reasons why you may not want to complete a purchase, negative commentary regarding the product may hurt the seller’s feelings–and also your bottom line.

3. Dressing Down- Literally and Figuratively.

Generally speaking, salespeople want to get you for every dollar they can. It’s nothing personal, it’s just part of their job description. If they think you have money, then they may be more inclined to pursue an aggressive price point. I’ve heard of car salesman looking at the size of a woman’s engagement ring.  Why do you think that is?  Consciously or unconsciously, the seller is studying you and trying to figure out your budget.

Generally, people want to help people they like. If you come across as “stuck up” that may hurt you in getting the deal you desire. If you come across as “well to do” then that too may hurt you as well. Negotiation is all about attitude. I’m not suggesting you walk into the sales floor in rags, merely that you may benefit from toning it down.

4. Starting Over.

If you’re not happy with the salesperson or the price points, then walk away. Not as a tactic to get them to cave, but to simply find another seller.  Go to one of their many competitors (online or brick and mortar). Patience is your friend in finding the best quality at the best price in a negotiation.

Another technique you may wish to try is simply leaving your number. Again, this is not to be confused with the traditional threat to leave. Rather, say you like the product, but not the price; and if the price is ever comes down, that you would appreciate a call from the salesperson.

5. Systematically Decreasing Each Counteroffer.

This is a simple but effective method for a large purchase such as a house. Start the negotiation with a set starting price and foreknowledge of what your next two offers will be. Make sure the increased amount of each offer is smaller than the one before. This will signify to the seller that you’re digging in your heals. If you have done your research and the person will not give in at the end of this system, then you should consider walking. For example, your starting bid on a house may be $240,000. Your next offer could be $250,000 and your final bid could then be $255,000.00. Tell the seller that this offer is final. You might be surprised by how effective this simple technique is for securing a great price on a large item you really wish to purchase.

Do you agree with the underused negotiation techniques listed here? What negotiation techniques do you think are underused?

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Overused Negotiation Strategies are akin to pseudoscience: some people believe whole-heartedly in them despite the lack of clear results. Despite their common acceptance and use, more often than not they will be counterproductive for negotiating a good deal.

Sure, some of these strategies may fool an inexperienced opponent, but even the average college kid working at a big ticket electronics store will be able to call your bluff when you threaten to “leave the store and go to a competitor.” As with anything, there are exceptions to every rule. I also believe that at one point in time many of the negotiation strategies below were actually effective. That time has passed. At this point most of these overused negotiation strategies merely exist as negotiation clichés.

For each overused negotiation strategy below I will offer up an alternative that might provide a fresher approach to saving you money on that next big-ticket purchase. Here is my list of the top 5 overused buyer negotiation strategies.

1- Bluffing About Competitors’s Prices

Here is what the seller is thinking when you say you’ve found better prices at a competitor’s store: “That doesn’t sound right, but hey, if you can get that ridiculously low price elsewhere then perhaps you should go take advantage of it.” 

The seller might simply call the bluff and say they know their price is the best in town and can’t be beat, or that the price you are stating doesn’t sound accurate. The seller might also begin to use your bluff as a starting point to begin talking about how their company is different, such as a “killer warranty” or maintenance program that the competitors don’t offer. Finally, the seller might simply respond: “If you provide documentation competitor X is offering this item at Y price, then we will match it.” This of course would be great if you weren’t bluffing about the competitor’s price being lower.

Try this instead: Do your research and actually find the best prices. If you are going to a store that you prefer to purchase from but hasn’t advertised the lowest price, then be ready with documentation of more competitive pricing.

2- Threatening to Leave the Store and Go to a Competitor

These days you often end up dealing with a non-commission employee working at a big-box type major chain store. They are making close to minimum wage and will continue to do so whether you buy that flat screen television from them or not. Do you think they really care if you leave the store and go to a competitor? That sounds like more of a hassle for you than for them. A threat only works if the threat puts the other person at risk of losing something.

In many situations a threat to leave a store does not risk the employee losing anything whatsoever. In fact, if you carry through on the threat they may consider it a win. After all, their job status will remain the same with the exception that they won’t have to deal anymore with you, the difficult customer. Please note that this negotiation strategy may work better for commission based sales (i.e., a car salesperson might be more inclined to put up with it then a non-comission based customer service representative).

I believe the best negotiation strategies involve rapport building and making the other party want to give you the best price because they like you or have compassion for your situation, not because you are making idle threats against them. If you were a seller wouldn’t you be sick of buyers always threatening to leave?

What to do Instead: Everyone threatens to leave and go to a competitor, so instead make it more personal. Be honest, try to gain empathy, and leave the competitor out of it. Here is some suggested dialogue for a better approach: “I really appreciate you working with me on this potential sale. I love this store and if I was going to buy item X from anywhere, it would be here. The thing is, this item is just a little out of my price range. I know that’s not your problem but it’s why I don’t think I can make a purchase today. Is there anyway you could work with me to take a little off the price?”

This approach is more honest and will likely be met with a positive reaction from the seller.

3- May I Speak to the Manager?

I actually generally like this approach. That said, I still feel it is overused. Asking for a manager is not the only negotiation technique in the book and it certainly shouldn’t be used in every situation.

Try this instead: Everyone asks to speak to the manager. This often subtly offends the person you are dealing with. Remember, that person is likely reminded all day long that they are lower on the totem pole than their manager. Of course, you are faced with the reality that managers often have the ability to give better deals than salespeople.

What I do in these situations is go head on into the negotiation and try to hold out as long as possible from going over the salesperson’s head. At a certain point, if I recognize that the seller cannot budge any further or if they lack the authority to make a better deal, I will then ask if the seller will speak with their manager on my behalf. This can be less offensive to the seller, as you maintain their status as the point person in the deal. Plus, who do you think is more persuasive to the owner/manager: you or the person who works with them on a daily basis?

Patience is a true virtue in an effective negotiation. The longer you keep the other party involved the more invested they become in finalizing a deal.

4- Good Cop/Bad Cop

You may think that your “divided” front will be magic for lowering prices. However, often times the opposite is true. Too many people attempt this approach. Additionally, you’re likely not the great actors you think you are. Most sellers will admit that the good cop/bad cop routine often leads to a buyer paying more money.

Try this instead: Go into the negotiation with a strong united front. Better yet, only let the best negotiator go in for the deal in the first place. A lot of people are not comfortable with negotiation. If your spouse/partner is the better negotiator then your attendance may only lead to problems. Moreover, experienced salespeople will often try and use spouse/partner guilt to finalize a deal. They almost instinctively recognize the weaker negotiator and go after them.

If both of you have fairly equal negotiating skills then perhaps the best play is to send in the partner/spouse who likes the item the least. Falling in love with a possession often comes across to a salesperson, and it will be used against you during a negotiation. The bottom line: fly solo and you will likely leave with a heavier wallet.

5- Low-Ball Offers

Imagine that you wish to sell your 2007 Chevy Cobalt. You know it is a decent car and in goodcondition. You do your research and learn than an acceptable price range for your car is $8,000 to $12,000. A potential buyer contacts you and makes a low-ball offer of $4,000. How do you feel? Probably a little irritated and insulted. People want to give a good deal to people they like. The low-ball offer might just be the most harmful cliche’ in the book. It instantly makes you seem difficult to deal with.

Unless you are negotiating from a point of extreme power, it may be best to stay away from making any low-ball offers whatsoever. Most people prefer to negotiate with somebody who appears reasonable. A low-ball offer is by its very nature, unreasonable. Try your best to avoid being mean to the seller. Your bad attitude will only hurt your chances at receiving a good bargain.

Try this instead: Research your item and come up with a legitimate price range. In our Chevy Cobalt example, the buyer should do their research to find that an acceptable range for that car is $8,000 to $12,000. If he were to offer a price such as $7,000 or even $8,000, he will have much better luck getting the price into the lower end of that range.

Conclusion

The overused buyer negotiation strategies above are mostly ineffective and obvious. These tactics might have worked trading baseball cards back in first grade, but not as adults.  If you insult a seller’s intelligence by attempting an overused negotiation technique in the wrong set of circumstances, then you might find finalizing a good deal is much harder than it needs to be. Treating the seller with respect and working towards an amicable result is a better negotiation process.  For a better approach to negotiation, check out these 5 UNDERused negotiation strategies.

What other overused negotiation strategies can you think of?  Do you disagree and believe that any of the above strategies remain very effective?

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If anyone knows about bargain hunting, it’s the Financial Engineer over at Engineer Your Finances.  Over the holidays, F.E. was in the market for a new car and decided to try out my free guide on how to buy a car. 

After his purchase, he was kind enough to circle back and share his thoughts with us.   

“Find the Best Car Price” lives up to its website’s name.  We didn’t just beat MSRP or Factory Invoice, but got our new car under Dealer Cost!  Within a few short emails, we shaved $4,000 off our purchase. 

Initially skeptical about this email process, I was amazed with how easy it was to negotiate down the costs.  We were anticipating much more dealer resistance – no one should subject themselves to the unnecessary pressure tactics again!

One of my own website’s pillars is knowledge.  Much of financial success & security is about learning what’s out there and educating yourself as much as possible.  With all the information available on the web, dealers can’t hide their profits anymore.  Protect your own profits and save thousands using this negotiation technique.

Three farmers are selling the exact same apples for $2.00, 2.50, & $4.00 per pound. Which farmer are you going to buy from?  Don’t let dealers take you for a ride and get the price you deserve using “Email Price Reduction”.

How do I know we got a great deal?  After our purchase we looked at the “used” counterparts and couldn’t find anything cheaper that didn’t have 30,000+ miles already on it.

Thanks for the feedback F.E.!  It’s always fun to hear how people saved big just by sending a few emails. 

If anyone else wants to share a success story, please send it my way.

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Whether you’re buying a car, hiring movers, buying tires, or negotiating almost anything, remember that you can only negotiate once.  What I mean by this is that salesmen will take you less seriously the second or third time you approach them to reduce the price.

If a company or salesman goes to the trouble to bargain with you in a competitive bidding process and you don’t end up following through with a purchase, you lose credibility. 

To salesman, time is money.  If they spend time with you competing on price, that means they are not spending time with someone else who could result in a sale.  The next time you reach out, they’ll likely be irritated and just quote you the retail price.  They’d rather spend their sales efforts or reduce their profit margin for a new prospect who might be more willing to pull the trigger quickly. 

An example negotiating car price

Let’s say you get car quotes for a new Nissan Murano from several Nissan dealerships.  Over the course of a few emails and a competitive bidding process you’ve worked out a deal with Nissan John.  You’ve negotiated the price down several thousand dollars on a red Nissan Murano SV.  But instead of buying the car, you decide you want to think about it for a few more weeks. 

Two months later you’re ready to pull the trigger.  You call back Nissan John and tell him you’re ready to buy.  Unfortunately for you, he says the red Murano SV is no longer available.  The only Murano he has left is a black SL that costs $2200 more. 

So you have to start the negotiation process all over again.  But guess what? Now when you approach those same Nissan dealers, they’ll consider you a “tire-kicker”.  If you’re lucky, they might still have a previously quoted vehicle in stock and be willing to honor the original price quote.  But more than likely, they have new cars on the lot and will start the bidding at retail price.  But this time, they’ll be less flexible on the price.  

The lesson to be learned is to make sure you are ready to buy when you start negotiating.

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Don’t take offense to the title, your father’s car buying advice was great until the past few years.  He probably taught you how to handle yourself at the dealership…act disinterested, throw out a low-ball offer, and never take the first counter-offer.  But with the tools available on the Internet, those old negotiating tips are no longer appropriate.

There are two popular schools of thought on how to negotiate car price.  Each strategy is based around making an offer and negotiating until you get close to your target car price.  But these approaches are based on the idea of negotiating with a single salesman and have become outdated.  Let’s take a look and see why these negotiating tactics will cost you money.

The 1st strategy:  Negotiate down from MSRP.

This is probably the most common tactic used to negotiate at a car dealership.  MSRP or Manufacturer’s Suggested Retail Price is the “sticker” price required by law to be shown in the window of a new car.   Most people know not to pay full price for a car and will try to work the price down from the sticker.

It’s common to start by throwing out a low-ball offer and attempting to haggle until a salseman comes down in price.  But this approach is flawed because the second you make an offer, you’ve set a price floor for yourself.  Now the salesman has a negotiating range to work with.   He’ll never counter-offer below your first bid, so the only place you’ve got to go is up.  And if you happen to make a mistake and set your initial offer too high, you’ve compounded the problem even more.

The 2nd strategy: Negotiate up from dealer Invoice.

Dealer invoice is the wholesale price paid by a car dealer to the manufacturer.  The theory here is that you find out what the car dealer paid and make an offer with a small margin of 2-5% to give them a fair profit and still get a good deal for yourself.  This approach is slightly better than the first, but still has inherent problems.  Again, as soon as you make an offer, you’ve set a floor and established a negotiating range for the dealer. 

On top of that, dealer invoice is not the lowest possible car price.  Both dealerships and car salesman have bonuses tied to sales quotas.  When either gets close to hitting their numbers, they become very interested in selling the last few cars.  These bonuses for selling multiple cars may greatly exceed any discounts they offer to you for an individual car. As a result, it’s occasionally possible to buy a car below dealer invoice.

So what’s the most effective car negotiation strategy?

The answer is to never make an offer to a dealer at all.  Instead, email multiple car dealers and ask them to make YOU an offer.   You will share the best price you have been quoted so far and ask them to beat it.

Do this by getting car quotes from several dealers and ordering them from the most expensive to least expensive.  Starting with the most expensive, ask if they can beat your best offer.  Work your way down through your offers updating your best offer as you go.

By negotiating this way, you’ll systematically reduce the price of the car.  Read the full Car Negotiation Crash Course and take advantage of the sample emails you can send to car dealers.

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Today we have a guest post from Wealth Informatics who shares some money saving tips on finding the best price for a rental car.

A rental car can be a big chunk of vacation expenses. If you add in all the state & local taxes, airport fees, facility use fees, underage fees, insurance, additional driver fee, refueling fees… it could get very expensive, very easily. But if you spend a little time you can save a lot of money and get the best rental car deal.

Basics of getting a low car rental price

To get the best price you have to understand a few basic things.

1. Contract Ids: Contract IDs are numbers issued to various business and organizations for their employees/members to use. Check with your employer if their contract ID can be used for personal travel, if not, no worries, there a LOT of other contract IDs you are eligible for. For example, use AAA Contract Id, Entertainment Book id, almost all airlines have their own contract Ids, even Walmart has one which is available for shoppers, meaning everyone. Each rental car company has a different name for this, Hertz calls this CDP (Corporate Discount Program), Avis has AWD (Avis Worldwide Discount), with National it is just called Contract Id.
2. Rate Code: Special offer rate code. If you include this, you are requesting a specific promotion like 50% off weekend rates instead of the standard rate. Your rental period should qualify for the rate you are requesting. For example, you cannot request the half-off weekend rate if you are renting from Monday-Friday.
3. Coupons/Promotion Code: This I think is the most widely used. It is just a code that if applied knocks off $$ or % from your rental price.
4. Convention/meeting number: This is applicable and worth a try if you are going for a convention or even a wedding. When you give this number and ask for a quote, you are given the group rate instead of the individual rate.

How and where to to find these contract Ids and coupon codes

1. Ask your employer first. Check if you can use their contract ID for personal use. It might even include extras like rental insurance.
2. Look online. I love MouseSavers.com. They mainly cater to the Walt Disney and Disney land destinations but the code they have is applicable in any city. Check out their discount pages for individual rental car companies for contract Ids and coupon codes.
3. Check out the organization or clubs that you are a member of but not included in the above mentioned sites 
   1. Warehouse clubs (Costco, BJ’s Club)
   2. Professional memberships (IEEE, American Bar Association)
   3. Alumni Associations
   4. Other memberships (USAA, AARP)
4. Rental car mailing list. This will allow you to get coupon codes in your mail.
5. Check out Flyertalk.com forums and Fatwallet.com/forums as well.

Figuring out the contract Ids is a one time process. Choose 4-5 Ids to work with, so that you can start with that every time. I have found that American Express platinum ID and AAA almost always give me the best rate with Hertz and Costco gets me the best deal from Avis… you get the drift.

Tips to get the best deal on a car rental

Now that you have the basics covered, it is now a mix and match game to get the best deal.

1. Shop around. Check with regular travel sites like Kayak, Expedia or Travelocity to get the going rate.
2. After you get a rough idea of the price, combine the Contract Id, Rate code and Promotion code to get the cheapest price. [...]

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Going into any negotiation, you should always know the value of what you are buying. It’s critical to establish a target purchase price and know what you should pay for a new car so you know when to pull the trigger on a deal. However, this should strictly be a point of reference for you. There is no reason to share this with a car salesman. I’ll explain why leaking information like this can be a very expensive negotiating mistake.

But first…

How do you determine a target car price?

There are a few schools of thought on what to consider a “good deal”. Some will tell you to spend hours researching rebates and incentives and try to understand the car manufacturers’ tricky shell games. Others will tell you to take the cost of the car to the dealer (dealer invoice price) and add a small margin between 2-4%. While that’s a reasonable starting point, it’s not specific enough because some makes and models can be discounted more than others. And some salesmen may be inflexibile on price, while others may be willing to sell a car below invoice.

My suggestion is to spend 10 minutes and check the following three sources to determine a good target car price:

1. Edmunds True Market Value (TMV®) Pricing Report: Enter a make and model and then click on the Pricing tab to find out what people are typically paying.  You’ll get a breakdown by average base price plus the average price for each option.
2. Truecar Price Report: Enter a make and model to get a price report that shows a clever graph of prices and ranges of “over priced”, “good price”, and “great price”.
3. CarsDirect instant quote: This site is not like the two above that provide trends based on historical data. However, their low, instant “CarsDirect Price” can be used as another point of comparison and comes with a guarantee. Also, if you end up not being able to find a better price elsewhere, you can always come back and buy here.

So why keep your target car price a secret?

Because as soon as you throw out a number to a salesman, you’ve set a price floor for yourself and they will not negotiate below that number. This can end up costing you hundreds of dollars. Instead, follow my car buying tips and make car dealers compete with each other instead of competing with you. They will keep lowering their prices to beat their competitors and could very well drop below your target price. So don’t prevent yourself from getting the best possible car price and keep this number to yourself!

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