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How To Negotiate To Buy A Car in 2010

Friday, February 26th, 2010
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The Global Recession May Make Buying A Car Easier This Year

The Global Recession May Make Buying A Car Easier This Year

Despite the fact that the world is emerging from a global recession, sometimes the need to buy a car shows up just when you least expect it. If that time has arrived for you, then maybe we should spend some time talking about what you need to do in order to successfully negotiate the purchase of your next car in 2010…

Three Phrases You Need To Know

Michael Royce has spent a lot of time researching how best to buy a car and he believes that you need to understand the difference between three different car buying terms before you first step foot inside of a car dealership:

  1. Sticker Price: this is a fake value – if the car dealership could sell the car to you for this price, then they’d be happy because this value represents a nice big profit margin for them. For you, all this value means is that you should be able to buy the car for much less than this value.
  2. Invoice Price: this is how much the car dealer paid the car manufacture for the new car. In theory, this value does not include any car dealership profit in it and so the car dealer will need to sell the car to you for more than this value. However, if the car manufacturer is offering rebates and other special offers, the car dealer may actually be buying the car for less than the invoice price.
  3. Wholesale price: for a used car, this is the price that the car dealer paid for it. If you look in used car pricing books, they will list both the wholesale price (what the dealer pays for the used car) and the retail price (what the dealer will try to sell the used car for).

Remember: It’s A Game

In order to get yourself into a proper mental state to negotiate to buy a car, you need to sit yourself down and remind yourself that you are getting ready to play a game – it’s a game with very high stakes, but it’s a game none the less.

The biggest challenge that you will face is the simple fact that in this game the other side of the table may be much better at it than you are. The car salesperson does this several times a day, every day. You might think that this gives them an insurmountable advantage over you; however, it doesn’t – most car salespersons are not that good at what they do.

Since many of them only know how to sell a car by following a script that the car dealership has provided them with, you have a fighting chance – if you change the way that the game is played, then you will have gained the upper hand in the negotiations.

Your Strongest Tactic: I Don’t Need This Deal

In sales negotiating one of the most powerful tools that we have is the ability to walk away from the deal. All too often when we are negotiating to buy a car, we forget that we have this option. We’ve spent a couple of hours at the car dealership, we’ve gotten to know the salesperson and maybe even their manager, we’ve filled out some paperwork, its really started to feel like we’re committed to doing a deal with these guys. However, that’s not the case.

The great thing about being a car buyer is that there are a lot of different places that you can buy your car from. You don’t need to complete the deal that you are working on – you can walk away at any time. The other side of the table knows this too and they will do almost anything to prevent you from leaving.

You need to clearly state that you don’t want to talk about monthly payments (that’s like dealing in “funny money”), instead you want to talk about the selling price of the car. Don’t be in a hurry or give the appearance of being desperate (even if you are!).

Make sure that you’ve done your research and know what a fair selling price for the car that you want is. For new cars it’s probably a couple of hundred dollars over the invoice price and for used cars it’s probably $400-$500 dollars over the wholesale price. Start your negotiations there and be prepared to leave if things don’t go the way you want them to.

What All Of This Means For You

Royce makes the good point that even if you do walk out of a negotiating session, leave on good terms. There’s no need to burn bridges – this is just a business deal after all, not a personal attack.

The next day call the dealership back up and see if they still want to deal. It can be amazing how seeing you walk out the door can motivate them to find ways to get closer to the price that you want to pay.

Always remember that buying a car is very much a game that you play every few years. You’ll never do it as many times as the other side of the table has done it, but if you use these suggestions, then you can make the deal work out in your favor…

What’s the one thing that you think that you must do before walking into a car dealership to negotiate to buy a car?

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What We’ll Be Talking About Next Time

Remember when every business used to view themselves as an island? This made life pretty simple for anyone doing sales negotiations – it was always us vs. them. Well, it sure looks like someone farther up the corporate ladder has been reading those business self-help books and they’ve decided that there is a better way to go about doing things: partnering…

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Real Deals Use Real Money And Sales Negotiators Never Forget It

Tuesday, July 21st, 2009
Although Funny Money May Look Like Real Money, It Isn't! (c) - gaymay

Although Funny Money May Look Like Real Money, It Isn't...! (c) - flickr / gaymay

My daughter is currently learning about how to add fractions in school. The trick to doing this right is that you have to make sure that the denominator (the number on the bottom of the fraction) is the same for both numbers before you add them. She’s struggling with this concept and it reminds me of a key sales negotiating point – never try to do a deal using funny money.

Just What Is Funny Money?

We all have heard the phrase “apples to apples” right? Well funny money is something that can either sneak into a sales negotiation or be slid into it by one side of the table. When this happens, all of a sudden you aren’t comparing two equal things such as how much a product costs and how much you are willing to pay for it. Instead, all of a sudden you’ve got apples, oranges, and bananas on the table in front of you.

A great example of funny money in real life is what happens when you gamble in a casino: you don’t use real money, you use chips instead. There are a number of reasons for this, but a key one is that chips don’t “seem” like real money. That allows us to gamble more and not feel as bad when they all go away (although it still hurts when we get the bill later on!)

Examples Of Funny Money In Sales Negotiations

Whether intentionally or not, funny money can slip into just about any sales negotiation. It’s the careful negotiator who keeps his / her eyes open and spots it when it shows up. Here are a few examples of what funny money can look like:

  • Price Per Unit: If I’m asking you to lower your blue widget price by two cents per unit, that seems like a small matter, right? It is until you realize that I’m trying to buy two million blue widgets and so what I’m really asking for is a $40,000 discount. Now that’s real money!
  • Price Per Lot: This is the flip side of the previous tactic. If I’m laying mulch in my yard and you tell me that you’ll sell me 10 bags of mulch for $20, that sounds like a fair deal. Until I realize that since I need 200 bags of mulch, we’re really talking about me paying you $400 for mulch. The total quantity needed and its price is what we need to negotiate.
  • Interest Rates: This is exactly what built those credit card companies into the powerhouses that they are today. If I borrow $60,000 at 10% on a 5-year loan to start my business, then I’ve just agreed to pay the bank $16,489.20 for the privilege of using their money. Sure seems like I should try to negotiate a lower interest rate.

Final Thoughts

It is the job of every sales negotiator to train yourself to always be asking the question: what is that worth. Just like my daughter is trying to learn to remember that she always needs to convert the denominator of two fractions to the same value, so too do sales negotiators need to learn to always “map” funny money to real values.

No matter what the other side of the table says, always take the time to translate funny money into real dollars and cents (or whatever currency you are using). If you don’t take the time to do this, you run the risk of making a bigger concession than you intended to. Learn to deal with funny money correctly and this will allow you to close better deals and close them quicker.

Questions For You

Have you ever been in a sales negotiation that included funny money? What form did the funny money take? How did it get into the negotiation? Did you take the time to map it to real money? Did you end up making a larger concession than you would have if you had been dealing with “real” money? Leave me a comment and let me know what you are thinking.

Click here to get automatic updates when The Accidental Negotiator Blog is updated.

What We’ll Be Talking About Next Time

The basics of sales negotiations are pretty straightforward; however, it can be easy to lose sight of them as we talk about tactics, preparation, and detailed sales negotiation skills. Maybe it’s time that we took a step back and got an expert to remind us about what we really need to be doing in our next sales negotiation?

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Deadly Sins Of Sales Negotiations: Hope And 3 Others

Tuesday, July 14th, 2009

When Playing The Sales Negotiation Game, You Can't Just Hope To Win<br><a href=We all hear so much about the smooth Donald Trumps of the world that we can fall in to the belief that everyone shows up for a sales negotiation better prepared than we are. Nothing could be further from the truth. In fact, there are four common sales negotiation mistakes that even really smart people make all the time. Are you making any of them?

The 4 Deadly Sins Of Sales Negotiations

It turns out that the reason that so many sales negotiations turn out poorly for negotiators is because they enter into the negotiations with the wrong state of mind. Instead of preparing for the negotiation, they go in with a “let’s hope for the best” type of mindset. How can they possibly hope to do well?

Sales negotiators who have this type of mind set more often than not don’t do well during a negotiation. They fall prey to the four deadly sins of sales negotiations:

  1. No plan
  2. Bad agreements
  3. Poor reading skills
  4. No follow up

Your Plan Is That You Have No Plan!

While I worked for Siemens, there was a large French-Canadian director who would occasionally explode in strategy meetings and shout at people that “Your Plan Is That You Have No Plan!” In a sales negotiation, this is often the case when people enter into the negotiation without a plan.

Instead of a plan, they have hope. Hope that things will go well. That they won’t make too many mistakes. That the other side will make mistakes. A sales negotiation is a journey, not a destination. You need to have a plan (concessions, demands, questions, schedules, etc.) for how you are going to get to where you want to go.

Agreement Without Clarity

During everyday conversations with friends and coworkers, we all have a tendency to agree to things that we may not have a full understanding of. This is a polite way of keeping the conversation going even when we may not fully grasp what they are saying – we figure that we can pick it up later on.

This same type of behavior during a sales negotiation can be disastrous. If you don’t take the time to fully understand what you are agreeing to, you may find yourself quickly in a bad situation. Call for a break, take a time out, or ask the other side of the table to better explain something before you agree to it.

Doing A Poor Job Of Reading

Looking the other side in the eye and signing a contract with a big flourish sure can make a strong impression – that you don’t have any idea what you are really signing. I learned a long time ago that he who takes the notes, ultimately controls how a meeting turns out. The same goes for sales negotiations – it really doesn’t matter what you THINK you’ve agreed to, it’s the words that make it onto the paper that really matter. Take the time to read them!

Follow Up, Follow Up, Follow Up!

It’s too easy to think that a sales negotiation is over and done with once the last paper has been signed and the handshakes have been exchanged. However, both sides of the table have a responsibility to follow up and make sure that the agreement is being executed by both sides. Not only is this a critical part of doing business, it can have a big impact on any future negotiations between the two sides.

Final Thoughts

A long time ago I took a scuba diving class. One of the key lessons that they taught in that class was the simple phrase “Plan your dive, dive your plan.” The same thing can be said about sales negotiations: you need to have a plan and you need to follow it if you want to have any chance of being successful.

We now know what can happen if you don’t have a plan: you’ll end up skipping ove important steps like agreeing to things that aren’t clear, not reading things that you are signing, and not following up after the deal is done. Remembering to plan your negotiations ahead of time and avoiding the 4 deadly sins of sales negotiations will allow you to close better deals and close them quicker.

Questions For You

Have you ever gone into a sales negotiation without having a good plan? Did you end up agreeing to things that perhaps you didn’t fully understand because you didn’t know what you were looking for? Did you fully read the contract before you signed it? Did you remember to follow up to make sure that the contract was being followed after it was signed? Leave me a comment and let me know what you are thinking.

Click here to get automatic updates when The Accidental Negotiator Blog is updated.

What We’ll Be Talking About Next Time

My daughter is currently learning about how to add fractions in school. The trick to doing this right is that you have to make sure that the denominator (the number on the bottom of the fraction) is the same for both numbers before you add them. She’s struggling with this concept and it reminds me of a key sales negotiating point – never try to do a deal using funny money.

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Don’t Believe What Anyone Says Is What Sales Negotiators Need To Learn To Do

Tuesday, July 7th, 2009
Sales Negotiators Need To Know When To Hold The Truth - And When To Fold

Sales Negotiators Need To Know When To Hold The Truth - And When To Fold

People are either honest or they aren’t right? Umm, well not exactly. Look, in a sales negotiation everything is not as it seems. I hate to use strong words like “lying” or anything like that, but let’s just say that a healthy dose of skepticism is often a sales negotiator’s best friend.

What’s Going On Here – Can’t Anyone Tell The Truth?

The older a sales negotiator gets, the more he / she is less likely to believe just about ANYTHING that they are told. There is a reason for this! In the end, sales negotiating is all about power – who has it and who doesn’t. However, just like in the game of poker bluffing is not only allowed, it is often encouraged.

If you don’t believe me (or you don’t WANT to believe me), then think about how a buyer and a seller interact when they are trying to complete a deal to buy a house – talk about some serious poker playing!

Where Do The LInes Get Drawn?

We are in a very murky area here and it’s very easy for a sales negotiator to stumble over the line and fall into the dark side – becoming a flat-out lier. It’s necessary that you operate here, but you’ve got to watch your step.

Our house buyer / seller are going to be presenting information that may not quite be the complete truth. The house seller is going to be talking about all of the things that make the house a fantastic house – and leaving out any discussion about the leaky pipes in the basement and the squirrels that have set up a home in the attic.

Likewise the buyer is going to be trying to mask any real interest that he / she may have in buying this particular house. Additionally, the buyer will be working hard to NOT communicate how much funding he / she has to complete the purchase. Is anyone lying here? No – but they are also not telling the complete truth.

One Word – Be Skeptical

A good sales negotiator is ALWAYS skeptical about anything that he / she is told by the other side. This includes when the other side uses facts & figures (where did they come from?), experts (what makes them an expert?), and handsome bound color documents (Kinko’s can turn out great stuff overnight).

As a sales negotiator your job is to always be asking questions. Take nothing at face value and always assume that the other side is probably not giving you the complete story. This is how you are are going to transfer power from the other side to you.

Final Thoughts

Being a “doubting Thomas” is a great skill for a sales negotiator to have. One important rule of life has been give to us by the Las Vegas board of tourism: “What happens during a Sales Negotiation, stays in the negotiation.” This means that you can’t have any hard feelings about what information the other side revealed (or didn’t) during the negotiation after it is all over and done. Having a healthy dose of doubt while negotiating will allow you to close better deals and close them quicker.

Questions For You

Have you ever accepted anything that the other side has told you at face value during a  sales negotiation? Did it turn out to be completely true? Have you ever been fooled by the other side? Have you ever stretched the truth during a sales negotiation? How did the other side use the information that you gave them? Leave me a comment and let me know what you are thinking.

Click here to get automatic updates when The Accidental Negotiator Blog is updated.

What We’ll Be Talking About Next Time

We all hear so much about the smooth Donald Trumps of the world that we can fall in to the belief that everyone shows up for a sales negotiation better prepared than we are. Nothing could be further from the truth. In fact, there are four common sales negotiation mistakes that even really smart people make all the time. Are you making any of them?

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3 Secrets Successful Sales Negotiators Use To Win

Tuesday, June 2nd, 2009
3 Secrets That Top Sales Negotiators Know

3 Secrets That Top Sales Negotiators Know

Ok, so I’ll be the first to admit it – I used the forbidden word “win” in the title. In sales negotiations we prefer to not say “win” because it implies that there is also a “loser”. and that’s not a good thing. How about if we try something like “3 secrets to always walking away feeling successful“?

It’s All About Patterns

Successful sales negotiators are good at what they do because they know what they are doing. That being said, they also have developed patterns for conducting sales negotiations that serve them well. If you want to improve how your sales negotiations turn out, then taking the time to study these patterns will help move you towards your goal.

The 3 Secrets

  1. Control Your Location & Time: Just like most sports teams, the sales negotiator who conducts a negotiation on his / her home turf tends to do better. Negotiating at your base of operations makes life easier – you have better access to information and people and you spend less time searching for things that you need to complete the deal. Additionally, although there is no one perfect time to conduct sales negotiations, every deal has its own best time. Late on Fridays can often be a powerful time to close a deal quickly!
  2. Understand Your B.A.T.A.N.A?: Before you start any sales negotiation, you need to make sure that you have a good understanding of what your Best Alternative To A Negotiated Agreement (BATANA) is. If the talks break down, what will your next action be? Knowing this in advance gives you more power while you are negotiating.
  3. Start High, Give In Slowly: If you are negotiating to sell something, you need to plan the negotiation in advance. This means setting your price high enough so that you have room to allow the other side to “bring you down”. During every negotiation, you will have to make  concessions to the other side. Studies have shown that sales negotiators who make their concessions in smaller increments seem to end up doing better.

Next Steps

The art of sales negotiations does not have one magic “sliver bullet” that suddenly transforms an average sales negotiator into a top-notch sales negotiator. Instead, there are a 1,000 negotiating skills that provide the scaffolding that we all need in order to climb to the next level negotiating. Get this right and you’ll be well on your way to being able to close better deals and close them quicker.
Click here to get automatic updates when
The Accidental Negotiator Blog is updated.

Questions For You

Have you ever had to conduct a sales negotiation in a location that was less than ideal for you? How did that deal turn out? What was the best time that you ever conducted a sales negotiation? What was the worst? Leave me a comment and let me know what you are thinking.

What We’ll Be Talking About Next Time

Wouldn’t it be great if the best sales negotiators in the world could drop by our place and sit down with us for awhile to share what they’ve learned? If you knew that they were coming, what questions would you ask them?

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