How to Negotiate Prices – And Win!

Have you ever gazed vulnerably at a manila folder crammed full of mortgage documents that you are about to sign and wondered if you could have gotten a better deal? Almost everyone who owns a house has had this feeling before; this is usually because they didn’t take time to effectively negotiate a better price with the lender. Most people fail to negotiate because they feel uncomfortable discussing the subject matter or the uneasiness that accompanies negotiating. For the most part, people hate confrontation and would rather pay a little higher price than have to negotiate.

Studies show that most borrowers will return to the same lender time and again, even if they know that they can get a slightly better deal elsewhere. This is to avoid having to negotiate and the fear of getting hammered by an unknown lender. Consumers could save hundreds or thousands of dollars each year by employing some simple negotiating tactics throughout the year. Some examples of where you could save money are your mortgage, car, life insurance, tires, mechanic, electrician, plumber and more. By simply taking an extra step to negotiate you could probably save enough money for your next vacation.

Negotiating doesn’t have to be a grind and it doesn’t have to be tacky, it has to be planned. Much like chess, when you know how your opponent will move next, the game is yours. One strategy for successful negotiating is to simply set up a higher authority when making these purchases. This is called “good guy, bad guy” gambit and is commonly used in the car business. I’m not advocating that you behave as a car salesman does, just merely use the same gambit. Think about it, car salesmen have been using this tactic for years and you have probably never been aware of it.

Have you ever noticed that the car salespeople are your “friend” when you’re buying a car? It’s the “mean manager” that won’t cut your price or give you more money for your trade and the salesperson is on your side. Before you know it, you’re asking your salesperson to negotiate for you with the stingy manager to cut the price. If the sales manager says “No” you’re not angry at the poor sales person, after all, he’s on your side.

This is called “good guy bad guy”, the salesperson is the good guy and his sales manager is the bad guy. The truth is, when your salesman scurries off to “go to battle” for you with the “mean manager”, he’s actually talking about the weather or the Braves game with him. Both he and the manager have a vested interest in you paying more for the car. The reason salespeople use the good-guy bad-guy gambit is to avoid tension and to keep the consumer’s ego from spoiling the negotiation.

Most consumers are inexperienced negotiators and have the tendency to draw a line in the sand early in the negotiations, i.e.” If you don’t give me this price or rate I will not do business with you. This calls the consumer’s ego into play, and usually kills the deal. This is why most people that try to negotiate a mortgage or car purchase will usually begin with company “A”, throw out an unreasonable offer, have it rejected, and eventually buy the product at company “B” for the same price that company “A” offered.

In the history of negotiating, man’s ego has killed more deals than the price ever has. To avoid having each other’s ego spoil your next deal, try setting up a higher authority who is calling the shots for you on the purchase, i.e. your husband, wife, mother, father and so on. A higher authority is a fictional person that you create that has the power to say “yes” or “no” to you being able to purchase the product. The higher authority will be the “bad guy” and you will be the “good guy”. You may feel a little emasculated by doing this however, you’re trying to save money, not impress the salesperson with your negotiating skills.

You should begin by telling the salesperson something along these lines, “My (uncle) told me to use your company to get a good deal on (insert product or service). This gives the salesperson the impression that you are na├»ve and you are serious about doing business. Follow up this with something like, “I have never bought one of these (products or services), can you help me get a good deal? At this point the salesperson should be salivating. Since you are “inexperienced”, all of your offers and counter offers during the negotiations will come from your “uncle” who is the family expert in these matters.

Now you can let your “uncle” throw out the first offer without bruising anyone’s ego. The offer should be slightly on the ridiculous side, you can say something like this: “my “uncle” told me that I shouldn’t pay more than (blank) for a (blank) is that about right”? After asking for the ridiculous price sit back and watch, you have just put your salesperson “in check”. The salesperson will most likely respond to your “uncle’s” offer with, “Your uncle is crazy”, there’s no way the (blank) could be sold for less than (blank).

The salesperson’s response is usually a lower price than the original asking price that was in play before. Now we have the salesperson’s first offer, which is what we wanted. Now all you need to do is pick up the phone and tell your “higher authority” what the salesperson has offered. At the end of the phone call you tell the salesperson that your “uncle” advised you to shop around. Then you apologize for you “higher power’s” behavior and explain to the salesperson that you like them and the product, but your uncle has advised you to shop around.

The salesperson will do one of two things, ask you to stay while they try to get you a better price, or they will just let you leave. If they let you leave, they probably don’t have much more negotiating room to work with. If this is the case, and you feel like you have been given a fair price, you should try to chip away at their counter offer. You do this by telling the salesperson that you think you can get your uncle to go along with the deal if he could just give you a little better deal. This usually gets you a little more knocked of the price. You can repeat this step as much as you like until you get the deal you want.

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