In the midst of my midlife crisis, I decided I really needed a convertible sports car. After an hour of haggling in the showroom, I couldn’t get the sales manager to budge from his $40,000 sticker price. Yet, just three days later I got the same car from the same dealership for only $35,500.
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When returning to the West Coast, I was upgraded from economy class to business class—a $1,200 value—without it costing a single penny or travel point.
Last month my lady friend and I wanted to stay at a small mountain resort we both enjoy. It’s a pretty “spendy” place (Northwest-speak for “expensive”) with rooms typically running more than $400 per night. However, I made a quick call and was able to book a room for $219 for that very evening.
How did I accomplish these feats of monetary magic? I’ll get to that after I answer a couple of universal questions:
How do you know if you’re getting a good deal?
I never pay much attention to the price tag. The sticker price represents what the business owner would like you to pay. It has nothing to do with how valuable the product or service is to you or what you might be willing to pay for it. For example, a liter bottle of water costs $2.29. If you’ve been in the desert for a week and are dying of thirst, it might be worth your life’s savings. On the other hand, if you only need a sip and there’s a water fountain nearby, you might not be interested in paying anything.
This is an extreme example, but it demonstrates an important principle: Real value is not determined by a price tag.
Of course, there are situations where the time needed to negotiate isn’t worth the potential savings. Few of us would try to get 10 cents a pound off the price of ground beef; the savings just wouldn’t be worth our time. On the other hand, saving $4,500 on the price of a new car is worth almost everybody’s effort.
Before you buy anything, you need to know its market value. Many things we know by heart: A cup of coffee runs between $1-2, a gallon of milk about $2-3, and a movie ticket is between $8-12. For other things, you may need to do a little research to be sure you’re not getting ripped off. Five minutes on the Internet can usually give you a ballpark value on almost anything.
Once you’ve established the market price, you need to figure out how much of a price reduction you might ask for. The discount depends on the type of product, its abundance, and when you need it.
When shopping for manufactured goods (for example, cars, electronics, or tools), 10 percent is a good discount, and 20 percent is great. With household goods (such as furniture, appliances, and carpet) you can try for an additional 10 percent. The deepest discounts come on services (hotels, broadband, and lawn care), where you can often get price reductions as high as 40 percent if you’re willing to pay cash, bundle services, and/or commit long term.
The more available a product is, and the more flexible you are, the more likely the opportunity to negotiate. For example, don’t shop for a black Toyota Prius with the sports package with leather seats. Decide which features are really most important. If it’s gas mileage rather than style, the color really doesn’t matter. (Besides, if you saved more than $1,000, you could paint it black and still be ahead.) Leather seats might be nice, but are they a deal-breaker?