Rules of Negotiation
by Paul Barrett
General Rules
Join the IFI - become a Member
Car buying and ownership is an area of financial management that can destroy your financial independence. As our membership numbers grow, we gain strength. That translates to a benefit for all members. Members can attend our seminars and learn how to create wealth, save money, and turn their lives around. Our goal is to help you live a happy, healthy, and prosperous life. Let us help you save money on your home purchase as well as your auto purchases. If you can't find a local dealer to give you a great price, we will shop out of the area for you and help you find a super deal.
Attend a Financial Wisdom Seminar
At one of our Financial Wisdom Seminars™ we will help you become financially stable, secure, and independent. We will cover the topics of buying cars, homes, investing and more. It is the ultimate money management seminar. Get wise! Being wise can save you a ton of money.
Use our On-Line Quote system
We cannot emphasize it enough: Use the Internet! The Internet is the most powerful and amazing tool at your disposal when shopping for a new car.
Not only can you find accurate information about the car you are thinking of buying, you can practically eliminate the need to negotiate. The Internet forces dealers to play fair. It forces them to offer you a decent price right from square one. It increases competition and forces them to compete for your business. The Internet gives you the ability to comparison shop for car, loans, leases, extended warranties and insurance. All from the convenience of your home. The internet is also a powerful tool that exposes the dirty tricks the salesperson uses and can teach you how to negotiate a great deal.
The internet is amazing. It takes the power out of the hands of the dealer and gives it to you! Use it, use it, use it!
Use the IFI Discount Buying Club
As a member you can get a low no-haggle price on a car. To get membership prices, join the IFI. Looking for the best price on a new car or truck? As an IFI Member, You Can Now Save bundles on your next auto purchase!
Buy from the Dealers on your Membership List
The dealers on your list are aggressive at beating the competition and will try to give you the best price possible. If you shop around, get the best deal from the competition and then come back and give on the membership list a chance to beat the your best price.
If you are ready to negotiate:
Stay in Control of Yourself
This is one of the most important rules. If you fall into the trap or rushing into a deal, you will lose. If you fail to discipline your emotions, you will lose. If you fail to stick to a plan and to the price that makes sense, you will lose. If you can control yourself you will always win. Most people are not disciplined. They are easily manipulated by the salesperson into making a bad deal. The greatest tool in negotiation is to control yourself and your emotions.
Negotiate Three Deals.
You can get the absolute lowest price on a new car and then get taken to the cleaners on the trade-in and financing. Net result, you lose! When you negotiate or haggle you must do it in all three of the following areas:
1. The purchase price of the new vehicle
2. The amount they are willing to give you for your trade-in
3. The cost and terms of the financing
Although you are negotiating three deals, you will do them one at a time. Salespeople like to jump from the new car price to the trade in price and the monthly payments. They keep juggling the numbers. Not only is this confusing, the numbers are always in their favor. Start with the price of the new car. Don't negotiate anything else until you get the price you want. They will try to take their profit on your trade in or the financing. Here is where you must draw the line and continue to negotiate or you will get reamed. That is why it is always best, if possible, to sell you car to a private buyer, and line up your own financing.
It's your Money - Use it Wisely
Salespeople play mind games. One of those games is to get you to feel obligated to buy from them. From the free soda to the test drive, they make you feel like they are going out of their way to be of service. Then they act as if they are going to bat for you in the negotiation process. They act as if the manager is the one trying to steal money out of your wallet. The truth is, the salesperson is putting on a good act. It's all a staged show that they have been trained to perform. And they have gone through the act hundreds of times, with countless customers. Bu this act works. Many people feel so obligated to give the salesperson their business that the idea of walking away from the deal causes intense feelings of guilt. The salesperson has hooked them. If you knew the truth, you would definitely not feel obligated to a person who has tied up your time, tried to get as much money out of you as possible, and pretended to be on your side.
Before you feel guilt ridden and obligated to sign for that new car, make sure the deal makes sense and you got a great price. Remember, every month you will have to pay for your decision. It's your money on the line. Don't let a salesperson hoodwink you. Use your money wisely. The salesperson is not your friend, he is your adversary.
Use a Buddy System
Salespeople never negotiate a deal alone. They will always beat you by using a Buddy System. In the Buddy System, any agreed price must be given the OK by a second party. The salesperson will always get the approval of the sales manager, even when it is not needed. This way the salesperson looks like the good guy, negotiating on your behalf against a tough sales manager. But it's only a game - a game you can play by using your own buddy system.
When you use the buddy system on a salesperson, one of you must be the easy going communicator (good cop) and the other is the hard nosed negotiator who sticks to the numbers (bad cop). If the salesperson brings you a price that does not agree with your plan, the communicator is congenial while the negotiator turns down the deal. This way one of you is on the good side of the salesperson and keeps the negotiation process in motion. At the same time, your hard nosed negotiating buddy kills every offer the salesperson brings. This system can bring amazing results if worked right. The salesperson will try to please the communicator, but also knows he must please the tough negotiator if he wants to make a sale.
This system also keeps you disciplined, and prevents you from being overly emotional, anxious, and excited. It keeps you from prematurely accepting a bad offer. It also breaks down the salesperson, and they are more likely to get down to the bottom line much quicker.
Don't Rush
Impatience on your part will put the power in the dealer's hands.
Even if you are in a bind and need a car right away, don't let the salesperson know it. Time is a negotiation factor. Whoever has the most time wins.
Most people are in a rush in all areas of their live. If your car is about to breathe its last breath or it broke down, you may be under pressure to get a car NOW. If you let the salesperson know this, they will take advantage of your situation. You be at their mercy. That means you will get reamed to the hilt.
If you car needs minor repairs, fix it. Don't dump "Old Betsy" just because you think she will nickel and dime you to death. Chances are it's not true. Their plenty of life left in that old car. Nurse it along until you can get a super deal on a new ride.
If your car is in serious trouble and you know something major is about to happen or it already has, then you might want to borrow a car or get a rental for a week. Think about it. If you rent a car for a few hundred dollars and save thousands, it's definitely worth it. Preferably rent a car that you are contemplating buying. Talk about a test ride!
Don't Say YES to the First Proposition
Before you get to a dealer you should know what you want and what is fair. When the salesperson offers you a deal, don't accept their offer. Never say yes to their first proposition. The only time to say yes is when you get the deal you want.
Learn to Act
If the salesperson make you an offer you don't like, express your dislike first in a nonverbal manner. Look shocked, and flinch. Put on a sour, unhappy face that tells the salesperson, he just gave you the worse deal of a lifetime. Do this even if the offer isn't that bad. Acting in a nonverbal manner is more believable, and salespeople are sensitive to it. They can't react to an unhappy face in the same way they can a verbal que. if you look really annoyed with his offer the salesperson has to start giving ground to win you over. Make him work hard. You may not win an academy award but you will get a better deal.
Give them the Big Squeeze
Every time the salesperson gives you a figure, be nice. But do say, "I'm really sorry, but I had a smaller (or larger) number in mind. You really have to do better." After you tell them that stay quiet. Don't make a peep. Don't blink or fidget or act nervous. Just stay quiet. By staying quiet you put the ball in their court. You gave the salesperson the big squeeze. If he wants the deal he has to give you a better price. If he asks you a question or tries to offer you something short of what you really want, just repeat the process.
When the offer is really close to what you want, you may want to split the difference. That's fine. Just don't be the one to offer to slit the difference, wait for the salesperson to do it. You get a better deal this way.
Make Small Concessions
The negotiation process is not about fighting over pennies. It's about getting a really greed deal. Often there are times to make small concessions. If you know you got a really good deal, it may be time to concede a few minor items. This can make the deal flow easier, and also make everyone feel like a winner.
Don't be Intimidated
There is a book called "Winning Through Intimidation." The reason intimidation is used, is because it works. Intimidation works so well, in fact, that salespeople rely upon it to win deals. The average person is so intimidated they are afraid to negotiate. This is an unfounded fear. Nothing will happen to you in the negotiation process. It's a battle but it's not a physical battle. There will be no blood shed. The worst thing that can happen to you in the negotiation process is that the dealer will say, "NO." How bad is that? You will survive. Rejection will not kill you. In fact, it can make you stronger and more determined to get a good deal. Don't you know that successful salespeople never take "NO" for an answer? Neither should you. If the dealer says "NO" - it's often the beginning of the negotiation process. Don't be afraid of the dealer. Don't be intimidated.
Know Your Price.
Determine what price you want before you get involved in negotiating -- and stick to it. This takes a little research and discipline but pays off. We will help you determine a fair price, and we will help you get a good deal. But you need to be disciplined. You need to know what price you buy the car for, what you car will sell for and the interest rate you can obtain. If you know these things and stay determined to get a great deal, you will.
Keep in mind that dealers need to make a profit or they will be out of business. What you need to determine is how low can the dealer go on the price of the new car, what's the most he can pay for your trade-in, and what's the lowest interest rate they can get you.
Before you negotiate, you need to know the invoice price of the vehicle, the trade in value of your car, and the best financing terms available to you. This is critical, or you will not know a good deal from a hole in the ground. Once the salesperson pulls out the 4-square worksheet, it can get very confusing unless you know before hand the optimal numbers that compose a great deal.
It is recommended that you bring a notebook, and keep track of all the numbers. If you don't write things down it gets confusing. You need to compare the numbers the dealer gives you to the numbers you obtained from your research. When the numbers the salesperson gives you start to make sense, when they are close to the numbers you have calculated, it's time for the real negotiations to take place. Here is where you will haggle tooth and nail to gain and inch of ground. Here is where you will also get a great deal and save a bundle of money.
There's a lot to calculate and retain. Keep writing it down. What's the invoice price of the new car, are there holdbacks, rebates, or other incentives? How much are they giving you for your trade in? Is it a fair price? What interest rate are they charging you? Is it as good as your bank?
Once the deal looks good it may be time to start using some of the other negotiation skills. Is it time to talk to the Head Honcho? Is it time to make a small concesstion? Is it time to give them the Big Squeeze? Is it time to leave the dealership and shop the competition? And finally, is it time to sign the papers and buy a new car?
Only by knowing the numbers in advance will you be able to determine if you got a good deal. There is no doubt that this process can be daunting and confusing. The effort, however, can be worth the aggrevation. Only concede in small amounts. If the dealer is unflexable it may be time to shop around. Do your best.
Stay Cool.
Emotions cost you. Being too anxious, getting impatient, and especially getting angry will cause you to lose. The best approach is to stay cool. Believe me there are countless times that I have seen customers as well as salespeople lose their composure. Salespeople can get very angry when things start going against their favor. After all they are losing money. If you also lose your temper, it becomes an ugly thing. Be friendly and warm. Be easy to do business with. Use psychological warfare and win the war!
See the Head Honcho.
If you have been negotiating for a substantial period of time and the salesperson finally says, NO -- and he us unwilling to give ground, it's time to see the Head Honcho. Remember, the salesperson can only cut the price so much or they start losing their commission. The sales manager or owner, is more concerned with making the deal and selling the car. They have the power to cut the price down to the bone.
Once you start talking to a sales manager, it does not mean the price will instantly come down. They are seasoned professionals at negotiating. Just think of it as a step closer to getting the prices you want. Just think that the real negotiation has just started and prepare yourself for an all new battle ground.
Walk Away
If the salesperson is not giving you honest answers, he lacks knowledge, is unreasonable, too aggressive, evasive, or you simply do not like him for, you can try another salesperson or simply walk away.
If the deal looks so bad that it's totally unacceptable or the dealer won't budge, walk away. Ultimately, if you are afraid to walk away, you will never win in a negotiation. Just like playing cars, "you got to know when to hold them, know when to fold them, and know when to walk away!"
If you have exhausted every means of negotiation and nothing seems to make a difference, if the negotiation process is frozen, often the only thing to do is to walk away. Remember walking away in the middle of negotiations gives you the power. The salesperson and dealer are the losers. They need you more than you need them. Plus if you leave in a congenial manner, you can always come back and resume negotiations. Usually they don't want you to walk away twice. When you do come back, come back with a better offer from a competitor. See if they can beat the deal.
Walking away can often be a decisive turning point in a negotiation. Often the dealer will concede. When they know you are serious about walking away, they will often try to save the deal. If they don't give you a better deal, then take a hike to the nearest competitor. Most dealers will be willing to accept a marginal or poor deal than no deal.
Salespeople also know that if you leave, to "think things over" there's a great chance that you will never buy a car from them. They don't want to lose a deal. That's why they are so aggressive and try to push you into buying the car "today."
Be willing to walk away. But only use it at the right time. Use it when all else is failing. Use it after you have dumped an unreasonable salesperon. Use it as a weopon of last resort and it will pay off. Always remember, if you stay in control of yourself, you will control the negotiations and you will win!
Practice your Skills
It's not a bad idea to practice the negotiation rules on car dealers not on our member list. It will help you in the final negotiation, plus it will help you determine what a great deal is.
Use the Competition.
Does the dealer really want your business? Are they willing to beat the competition? The way to find out is to compare prices. The dealership that really needs your business will be willing to negotiate and beat the competition. If you have shopped around, tell them what the competition is offering. In one of the rules, we said it may be a good idea to practice your skills. You practice by going to a dealer and negotiating your best price, then bring it to one of the dealerships on our list and see if they can beat it. If they want your business, if they want to make the sale, then they need to beat the competition.
Be Willing to Shop Around
Salespeople negotiate deals 5 days a week. Most people never negotiate a deal in their lives. Negotiation skills must be practiced. By shopping the dealers you will learn how to negotiate. You will also get some low prices, and gain confidence.
Once you have determined which car you want, go to a dealer that is not on our member list. Tell the salesperson that you are: Ready to buy a car today but you need their best price. Once the salesperson gives you a price, write it down with all the details of the car. Also have the salesperson write the price and details on the back of his car.
If the price looks close to the deal you want, ask the salesperson if he could do better. If he offers you a lower price write it down. Then thank him. Tell him you will think it over. Then leave the dealership. Of course they may try to get you to stay. Ask again if that's their best price. If they tell you it is, it's time to leave. Do whatever it takes to get out the door. Be friendly, but go. (Never offer a price you are willing to pay. Let the salesperson give you their best prices). Dealers hate when you shop, but this is one of the best ways to get the lowest price.
Go to a second dealer (not on the member list). Start the same process over. This time tell them you have a quote from another dealership. Then tell them you are: Ready to buy a car today, but you need their best price. Obviously they will try to beat the other dealership's price. If they give you a lower price, once again, write everything down. Ask if that's their best price. If it is it's time to leave. Thank them and get out the door. If they offer you a lower price as you leave, great, write it down. Then leave.
Go to a third dealer (not on the member list). Do the exact same thing you did with the first two dealers. When you three quotes, it's time to go back to the first dealer and start the process over. Ask if they can beat the competition. If they lower the price, write it down. Leave the dealership, but tell them you may be back.
Now it's time to go to one of the dealer's on our member list. Tell them you are ready to buy, you want their best price, and show them the prices of the competitors. They will do everything possible to beat the competition. This process takes a lot of work and patience, but it will help insure that you get the absolute lowest price possible.
There's a lot a work that goes into buying a car and getting the absolute lowest price. Often it's easier to accept the IFI's no-haggle member discount price. Only you can determine how much your time is worth and whether you have the stomach for tough negotiation.
In the Financial Wisdom Seminar we teach you how to save money on all your purchases. Let us help you get wise.
Remember, my job is to help you become financially stable, secure and independent. I will do my best , you do your best.
Your author and friend,
Paul Barrett
