As many of us realize, that\u2019s not at all what he cared about. He simply wanted to put off having to ever discuss the price of the car for HIS benefit. You see, by asking you how much you want to spend on a monthly payment, the salesperson was creating a situation where he could bundle together the price and terms to give you what you (think you) wanted, while at the same time getting the dealership the highest price possible for the car.<\/p>\n
Let’s look at how this bundling of terms works and specifically how it can work against you as a buyer.<\/p>\n
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A Typical Negotiation Scenario<\/h3>\n
Let’s say you told the salesperson that you were looking to spend $500 per month to buy that particular car. Magically, the salesperson comes back to you\u2014after consulting his manager, of course\u2014and says, \u201cToday is your lucky day. I didn’t think I’d be able to do it but my manager has agreed to sell you this car with a monthly payment of $500.\u201d<\/p>\n
You sign the paperwork, happy that you\u2019re now rolling off the lot in your desired car for exactly the monthly payment you were willing to spend!<\/p>\n
Then you get home, and you decide to look at that paperwork in a little more detail. You remember that you had to put $3,000 down\u2014but this is standard right? The list price of the car was $38,000, so that\u2019s less than 10% down. What a deal!<\/p>\n
And according to the paperwork, you got a great interest rate of 4% on the car loan, with just 72 monthly payment. In six years, for just $3,000 down and $500\/month, that new car is all yours!<\/p>\n
Related:<\/em> <\/strong>The No. 1 Most Important Factor to Win Any Negotiation<\/a><\/em><\/p>\n How much did you pay for that car?<\/p>\n Well, if you plug the numbers into a loan calculator, you\u2019ll find that you paid right about $35,000 for that car. Not bad, huh? Especially given the $38,000 list price.<\/p>\n Now, as soon as you leave, I drive onto the same lot, and find the exact same car you just bought. I express interest, and the salesperson comes back with the same question, \u201cWhat type of monthly payment are you looking to spend?\u201d<\/p>\n My response is likely going to be, \u201cWell, before I can even think about buying something new, I need to know how much you can give me for my trade-in. I just need to ensure that I can get a really good trade-in value before I decide on whether I can afford something new. Can you tell me how much you\u2019ll give me on a trade?\u201d<\/p>\n The salesperson takes my trade-in back to the shop, they\u2019ll look it over for a half hour, then come back and say something like, \u201cWe can give you $2,000 for that trade-in if you buy this other car today.\u201d<\/p>\n \u201cHmm,\u201d I say. \u201cMy wife says that if I can\u2019t get at least $7,000 for the trade-in, we should just drive it until it dies\u2026\u201d<\/p>\n Related:<\/em> <\/strong>BiggerPockets Podcast 260: The Ultimate Guide to Negotiating (for the Negotiation-Averse) With Former FBI Hostage Negotiator Chris Voss<\/a><\/em><\/p>\n The salesperson\u2014knowing that he\u2019ll likely be able to make up the difference elsewhere\u2014gives in a bit, and we eventually agree to $5,000 for the trade-in. (How much did you end up getting for your trade-in, by the way?)<\/p>\n In front of the salesperson, I write down on my notepad, \u201c$5,000 TRADE-IN VALUE.\u201d (Trust me, that number will be misremembered by the sales guy if I don\u2019t write it down!)<\/p>\n The salesperson asks again, \u201cSo, now that we agreed on the trade-in value, how much are you looking to spend per month on awesome new car?\u201d<\/p>\n I respond: \u201cYou know, I haven\u2019t really thought about a monthly number. My wife just said to keep the price of the car as low as possible. The bottom line on the car is literally the only thing she cares about. That guy that you just sold the same car to a couple minutes ago\u2014how much did he pay?\u201d<\/p>\n The salesperson says: \u201cHe paid $35,000\u2014I\u2019ll even show you the paperwork. He negotiated us down pretty hard and got a great price. I can talk to my boss and see if we can get you the same price, if you want.\u201d<\/p>\n I come back with, \u201cI\u2019m going to feel like I got ripped off if I pay the same as some other random guy\u2026 And I see here on the internet that I can buy that same car down the street for a couple thousand less. Can you do $33,000?\u201d<\/p>\n The salesperson spends 15 minutes with his manager and comes back with the good news, \u201cWe\u2019re probably going to lose money on this sale, but my manager is feeling super generous today, I guess. So, we can do $33,000. Let\u2019s go get the financing handled and sign the paperwork!\u201d<\/p>\n Again, I write down on my notepad, \u201c$33,000 PURCHASE PRICE.\u201d<\/p>\nA Better Negotiation Scenario<\/h3>\n
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