This will usually result in someone 'winding you up'. This is where they offer you a super super low price that they can't actually do. They do this to get you to go around to other dealerships and shop them around. By the time you get back you'll be much more tired and tenderized. When they bump you up 1k it'll be in the same ball park as what other people said they could do- so you'll bitch, whine, and hate them- but they'll very likely get the sale.

It's not a horrible way to get a fair deal- but damn it's time consuming and miserable .

The second someone knows this stuff you're hosed. So I don't mention it and pretend that it's not true. Comparing negotiation to poker this is where you have air.

I disagree with your first point almost entirely- even if I have 100% profit the item I'm selling is still worth something, and I'll feel like I'm losing money by selling it cheap. Basically you already made x by getting the item for free- by selling it for less than it's value you lose the amount you sell it for under that items value.

What if its not an item. I realize there are costs associated with getting something valuable but lets just say you could easily afford to mark it down 50% for example but obviously selling it for 100% is best.

My goal is basically always going to be to sell it for as much as possible. Because of that I'm going to take the same negotiation approach as ever... I just might end up being willing to accept a lower number. I'll still make them work hard to get there.

EDIT: It's important to not change your methods based on what you have. Always rep the nuts imo.

I have a car to trade in. 2006 corolla. 65k KM. where/how does that fit into the negotiations?

It's another variable. The more variables you add the bigger the edge the better negotiator has.

They will attempt to buy your trade as cheap as possible obviously. Treat the trade in and the car you're buying as seperate negotiations and you'll do ok. Realize that you could get more money selling it on your own.

I'm getting ready to buy a used car. I found a 2010 model at a dealer with only 2,200 miles on it. New sticker price is about $55k for a 2011. They have this one listed at $49.8k. Seems ridiculously high. Edmunds says first year depreciation is about $12k.

I'm thinking of offering $42k to open, and going as high as $43.5. Offering $42 when they are asking almost 50 just seems so low.

What's my best play? Wait til the end of the month? Offer that now, then call back at the end of the month with the same offer?

Oh yeah, dealer is 50 miles away, so I want to do this over the phone. Will they even talk to me?

It's worth pointing out that first year depreciation usually includes wear and tear. This car only has 2200 miles on it- so edmunds isn't THAT accurate. I'd definitely reccomend looking at www.nada.com for pricing information rather than kbb or edmunds.

I like your offer point- and I'd definitely use the standard 'keep counter offering at very low increments until they either say yes or say no- and then leave' approach.

Basically come in and offer 42k. If they counter at like 49k say you can do 42.5k. Next offer 43k... Basically just hold your ground and keep your offer increment small. Once they give up leave and then wait for a day or two. If you like the price they offered at all then come in and buy it.

This method virtually guarantees getting the bottom price they'll take.

How do you reconcile this approach against the risk you have of alienating the person and making them walk away if you push too hard, in cases where they don't have to buy from you?

Sklansky and Miller's poker book NLHETAP has a chapter on betsizing where they discuss how to size a river bet where you have the nuts: (paraphrasing here) You have $1,000 effective remaining stacks and a $500 pot already. You could bet $100 and be called almost all the time and win an extra $95 on average, or overbet the pot $1,000 and be called 5% of the time and win $50 on average, or perhaps there's a third option such as betting $250 and being called half of the time where you average $125 profit.

I agree with you that most Westerners dislike negotiations and don't push nearly hard enough, but if what you wrote is true (that you always try for the highest number) than you are probably giving up EV.

slight derail. I carfaxed the car before calling to make an offer. It said a dealer in Oregon has it, I'm in Atlanta. I called Oregon and they double checked and DO have it.

Is this likely just a typo here in ATL, or could they be pulling some funny business?

/derail

There are a ton of factors that influence what you should be ok with in a negotiation. To be perfectly honest I usually make an offer that gets accepted at some point in the process. It also helps to be very friendly and personable while you're negotiating. Obviously common sense plays a part when it comes to what you should offer... In situations where negotiation is a standard part of the process like buying/selling a house or car you should definitely ask for the max- simply because making a sane reasonable first offer is -EV. The person who makes the first reasonable offer usually loses. This as a sidenote is why Obama is a god awful negotiator.

I hate referring to a reality TV show in a thread like this- but if you're looking for an effective negotiator watch Pawn Stars. The bald guy is actually pretty damned good.

Also 'as much as possible' is a very subjective statement. Obviously overbetting 1k into a 500$ pot is horrible because it's not terribly possible that it will work. In any negotiation if the villain snap accepts my initial offer I get very very worried .

Is there any merit to making an offer and sticking to it? Like Im envisioning an example with employer and employee I feel like that would be really powerful in a raise negotiation particularly if its in the high but reasonable territory.

Like for example say I have a solid employee who is asking for a raise. I am able to give 15% total and the employee opens by asking for a 15% raise. I open by offering 8% and the employee just says "no 15% is a fair offer." I think that is a really difficult position to be in as the employer because 10% will likely be turned down and 12% seems like I am nit picking and could be easily countered be standing at 15%. Thoughts?

That's a special situation that doesn't really qualify as a negotiation imo. Most transactions aren't actually negotiations. If you have a powerful position that generates a situation where you can get your terms met 100% of the time then you're using what I call the "Warren Buffett school of negotiation". Basically Buffett comes in and makes a solid if more than fair to himself offer- and he never ever budges. This take it or leave it approach works fairly well when you're negotiating from a position of strength.

It is important to note that this only really works if you actually mean it when you say 'take it or leave it'. If you don't it's counterproductive.

My problem with this approach is that if 15% in this situation is a fair offer- then the employee may be leaving money on the table by not starting at 20% and negotiating down. If he could have gotten 16% he's actually giving up a lot of money imo.

EDIT: In other words 'take it or leave it' is a double edged sword. If they take it there is at least some % chance that you could have done better by going through a more organic price discovery. As the employer if the employee makes a reasonable offer that is under the max I would pay him then I win already . Obviously this is the case because any number that is <than the number I would rather lose the employee than pay is a win for the employer.

Anyone know where to find dealer invoice pricing for Canada? The US data isn't very helpful considering the cars sell way cheaper there.

No idea. Seriously none.

slight derail, but...

1. Were you in the business when Saturn opened their dealerships? If so, what kind of performance did they get out of fixed vehicle pricing with no negotiating allowed?

2. What do you think of auto lease swaps? I have seen many instances where the mileage allowance was sufficient & the original lessee made a good enough sized down payment that it seemed worthwhile to get into one for just $300-$500 transfer fee.

1. No I wasn't. That being said there was a major dealership in San Antonio that had this strategy and they actually did quite well. It worked particularly with their Honda Dealership. http://gunnauto.com/ is the website of that dealership chain. Carmax also uses this strategy and it seems to work for them. I have a sneaking suspicion that this is the direction the entire industry will have gone in 20 years.

2. I think car deals come in all sorts of configurations. I think if math tells you it's worth doing then you're probably right. I personally like leasing as an option for people who like to drive regularly updated new cars. It's a better option for domestic buyers and a MUCH better option for foreign buyers. I don't think I'd ever actually buy new- If I decided I wanted to drive a new car I'd definitely lease.

If you are trading in an expensive car for a cheaper car, does the dealer care much that they are giving you both a car and cash? Assuming the dealership isn't tight for cash I'd imagine they wouldn't care because they should still be making money on both the trade in and the sale if treated as separate transactions, but do they fret about having to sink money into an expensive trade in just to move a cheaper used car?

I worked at both standard dealerships and Carmax during college. I definitely agree with this suspicion.

I'm not sure if 100% coverage will ever be possible, but it's definitely going to move that way for a variety of reasons.

I've never been involved in purchasing/leasing a car, but I'm looking to lease a new car (honda accord) in a few months, I'm based in NYC. Without doing any research of any kind, my plan was just go to the dealership based on the newspaper car ads (lease for $xxx, $xxxx due at signing, lease for 24/36 months) and just go with the ad. What things should I be on the lookout for that are negotiable, if any.

Thanks for doing this OP.

Absolutely not. They make money on the sale of the car and buying your car for less than it's worth. The way they look at profit is this: profit= (price of car a-cost of car a)+(wholesalers appraisal of car b-paid for car b). The appraiser is either the used car manager at smaller lots or a guy whose only job is putting values on used cars and keeping the used car lot stocked at auction. Often a car chain will have one very very good wholesaler who literally spends his day traveling around to all the car dealerships putting numbers on the trade ins.

There isn't much wiggle room on leases. You'll be fine. The biggest thing to worry about is them changing which car you get- which will change the numbers slightly up or much less likely slightly down.

LOL. Customer comes into standard dealership and says "I want a blue 2005 honda accord with less than 30k miles on it..." regular dealership salesperson says "I'll go ahead and call the used car factory!".

Same customer comes into carmax "Sure we have a car just like that in Louisiana... That'll be 250$ over retail book please."

Yeah I mean. It was a different experience. But as a whole, a pretty legit company. The employees enjoyed working there, the customers enjoyed shopping there. You definitely paid a little extra to buy a car there, but for lots of people it was worth it.

The problem with every dealership converting is simply that they don't sell enough cars. The margins at Carmax were fairly small because of the restrictions they had on cars they sell, and the ridiculous amount of money they spent fixing up trade ins to meet those restrictions. So Carmax made money off selling tons and tons and tons of cars. Random dealerships in non major metro areas don't have that luxury. But those dealerships are failing already anyway, so not really sure it matters.

I just think we're going to get to the point where Honda allows you to order your car through a website and the nearest dealership drives it out to you.