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How to Successfully Negotiate Lower Prices in Any Situation

By Carl Natale

negotiating car priceThe idea of negotiating can be intimidating. As consumers, we have been trained to pay the price marked on goods or services without question. If we feel the price is too high, we abandon the sale and look for cheaper options.

It’s an option that seems to work for us. But it could work better.¬†We don’t always realize we have the option to negotiate a lower price. To get the lowest price out of a transaction, you need to follow some rules that aren’t always easy.

Rules of Successful Negotiation

1. Do Your Homework

You need to know some important things about the service or product you want to buy before you begin negotiations:

  • How Much Do Competitors Charge? If you can tell the seller you know the item is available for a lower price, it puts a lot of pressure on them to lower their offer. Furthermore, it lets you know that you don’t have to accept the seller’s offer. You can walk away from negotiations and still get what you want.
  • What Is the Cost to Your Seller? It’s useful to know the margin between the seller’s costs and asking price, especially when buying a new car.¬†Research the invoice price that new car dealers pay the manufacturer – then you know the absolute lowest that they can go and still turn a profit.
  • Is the Seller Facing a Deadline? If a seller has to get rid of a product before a deadline, they are more motivated to sell at a lower price. Making money on the deal may not be the most important goal when a deadline is involved, as the consequences of waiting too long could be costly. Home sellers often have a deadline, as they may need to sell their property by a deadline so they can purchase another for which they are under contract.
  • Why Is Your Seller Selling? You don’t always buy from a business – sometimes you negotiate with sellers who aren’t even most concerned about making money. For example, someone who is moving may be willing to accept a very low offer for a large piece of furniture, just to be rid of it. Knowing why an item is for sale can give you an idea of how much money you need to pay.

2. Make the Other Side Name a Price First

By allowing the other side to name its price first, you may get a chance to counter with a number that is lower than what you would have offered initially – even if you do relinquish the opportunity to set the “price anchor,” which is the starting price point from which it can be hard to move. Of course, the initial price named by the seller may anchor you at a higher price, and this is where doing your homework can help. By knowing the competing prices, you may be able to significantly lower your anchor before negotiations start.

Michael Soon Lee, president of EthnoConnect and author of “Black Belt Negotiating,” is adamant about this point. He says naming a price first limits how low you can go in negotiations – even if you’re trying to establish a low anchor. After that, every counteroffer will be higher.

Lee states that you shouldn’t ever name a price. Once you do, the seller could agree to it and end negotiations – and it’s possible that the seller would have been willing to go lower.

3. Don’t Be Reasonable

The classic model of negotiation is that two parties offer different prices, eventually settling somewhere in the middle. Lee rejects that because the middle is too high of a price.

If you are going to make the first offer or name a price in a counteroffer, make it ridiculously low. Not only does it set the price anchor very low, but it puts the seller on the defensive. If they have a negotiating plan, it’s unlikely they will follow it after a ridiculous offer. They instead focus on getting a price higher than what you offer, and not what they want. The end result is a much lower price than what is considered reasonable.

This can be difficult advice to follow, as you may be afraid of being considered a jerk. Many sellers know that ridiculous offers are part of the negotiating process and are very unlikely to refuse to make the sale. Instead, they’re going to counter.

Furthermore, studies show that when faced with a ridiculous offer or counteroffer, a negotiator gains satisfaction from getting concessions from the other party. Therefore, if you offer $1,000 for that high-mileage used car in need of a brake job, the seller will feel like they won something by convincing you to buy it for $1,200 – even if it was worth more money than that.

It’s up to you to decide what is more important. Do you want to be liked, or do you want to save a lot of money? Remember, the two options aren’t necessarily mutually exclusive. You may not be judged as harshly as you think, and paying a reasonable price doesn’t really make you more likeable.

negotiation tug of war

4. Know the Limit

You need to gauge what is important to the seller. If they need to make a certain amount of money, they’re not going to budge. While you’re not trying to be reasonable, you need to let the seller walk away feeling they got something out of the deal.

As mentioned before, knowing a car dealer’s invoice price is powerful information. You know the truth when a dealer counters your offer with “I can’t go any lower.” Of course, while offering an extremely low price may work as an anchoring tactic, be prepared to settle for a price that allows the seller to make money.

5. Be Quiet

Silence between two people can be uncomfortable, and you can use that to your advantage after someone names a price. Instead of responding, look thoughtful without saying anything. This makes the seller fill the silence, and often, he or she will try to justify the offer. Let them keep talking and feel insecure. If you need to fill the silence, express hesitation about paying their price.

6. Ask for Extras

This is an important tactic to employ when you feel like you’re not getting anywhere. Maybe you can get accessories included with the purchase, or perhaps the seller will be willing to include some other low-cost items to make a sale on a large-margin item. For instance, cell phone providers make their money on long-term contracts. To motivate you, they may be willing to supply extras, such as phone cases or car chargers.

When the seller agrees to your target price, as it may be the lowest they can go, it’s time for you to see what else you can get for that price.

7. Walk Away

This is perhaps the most powerful tactic you have. In this economy, very few businesses can afford to lose a sale, and are afraid to let someone walk away without making a purchase. Above all, this gives you the upper hand in the negotiations.

Sometimes, just heading for the door or verbally ending negotiations is enough to motivate a lower offer. Even if you walk out the door, the seller may bring you back in or call you if you leave contact information. It’s an extreme tactic, but it can work.

However, the problem is that once you walk away, it is very difficult to go back. If the seller has a unique product and you have no other options, you can’t go to someone else. If you return after walking away, the power shifts to the seller. They will know you’re motivated to buy from them, and they don’t need to make any major concessions. Therefore, only utilize this tactic if you are willing to simply not make the purchase.

Final Word

Remember, it’s important to avoid trying to negotiate when you are faced with a deadline, as deadlines can motivate you to make concessions on price. So don’t wait until the last minute to start searching for a new car, a house, or any other negotiable item you need in the foreseeable future. A tight deadline can eliminate your opportunity to negotiate the lowest price, so give yourself plenty of time to shop around and play hardball with the seller.

Are you comfortable making aggressive offers when negotiating?

Carl Natale
Carl Natale is a recovering journalist in Maine who makes his living in the gig economy. That means he's a freelancer who writes about small business and healthcare issues for several online publications. When he isn't researching and explaining financial advice, he's recharging his batteries in the woods or on the water.

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  • http://www.singleguymoney.com Single Guy Money

    One thing to add is that you probably want to pay in cash. Cold, hard, cash is more likely to help you get a discount.

    • carsalesman

      not in car sales. dealerships would much prefer that you finance and may be willing to give you a couple hundred dollars more off if you finance and then pay it off when you want to at any point.

  • http://makingcentsoutoflife.com Kristin

    How about pointers now on how to ask for that discount? Ways to negotiate are great but what do you say? That’s where I get tongue tied.

  • http://ownthedollar.com Hank

    Be ready to walk away or threaten to walk away.

  • Yeayea

    this article is horse crap ,people should have class , nothing more annoying then some stupid azz asking for a discount at a retail store , if you can’t pay the asking price ,than dont beg for a discount ,an establishment is different from a flee market. alot of the times the margin profit price isnt that much ,and most people never owned a business ,and think your making 100% profit.
    dumb people,dumb articles, and dumb responders

  • Ashley

    This is absurd. As someone who has always worked in retail management, I find it to be very frustrating when customers ask for a discount. Corporations can’t usually do this…

    • Crashdamage1957

      Yes they can. And they do.I have done this with a number of consumer goods retail chain outlets as well as with well known mail order houses. Typically getting a discount will involve multiple purchases, particular when the item is a relatively low dollar item. If I really was planing to buy 3 of something, say one in blue, one in red, and one in green, i might ask something akin to ” how much are they a piece if i buy more than one’? Often, I find a lower price per item is offered. If not, I have the option to decline to make a purchase, or i might note that a competitor is offering a lower price, would they match the offer? Note this only makes sense if you need or at least can use whatever quantity is purchased. it makes no sense to spend more money on stuff we don’t need in the first place, just to get the rush of endorphins from getting ” a deal”

    • Crashdamage1957

      Yes they can. And they do.I have done this with a number of consumer goods retail chain outlets as well as with well known mail order houses. Typically getting a discount will involve multiple purchases, particular when the item is a relatively low dollar item. If I really was planing to buy 3 of something, say one in blue, one in red, and one in green, i might ask something akin to ” how much are they a piece if i buy more than one’? Often, I find a lower price per item is offered. If not, I have the option to decline to make a purchase, or i might note that a competitor is offering a lower price, would they match the offer? Note this only makes sense if you need or at least can use whatever quantity is purchased. it makes no sense to spend more money on stuff we don’t need in the first place, just to get the rush of endorphins from getting ” a deal”

  • http://www.carlnatale.com/about-carl-natale/ Carl Natale

    In many other cultures, negotiating is common and part of business at all levels. In America it’s your choice whether you want to be seen as having “class” or want to save some money. It is up to you.

    I used to work for a paint store. It was common place for homeowners to come in and ask for the pro discount. The manager gave them 10 percent (not the pro discount) to make them feel good.

    The manager also made it a practice to always ask for discounts or a better price when he bought retail.

    Basically, you never know until you ask.

  • http://www.sjfpc.com/home.html Steven J Fromm & Associates

    Nice piece offering some very sound strategies and insights into the process. Thanks.

  • jved akhtar

    hai any one help me?

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