The art of negotiation
A few months ago I started looking to buy a car.
A bit of research showed that the price of the make and model I wanted ranged from £18-32,000 depending on model, age and mileage. I set a budget of between £20-25,000 with the aim of trying to spend at the lower end of this range.
I found just the car I was looking for, but it was up for £23,000. The seller had bought the car new in April 2017 and was changing because he needed a camper van to accommodate his family weekends away.
I checked with www.webuyanycar.com to see what they would offer for this car. They said £18,600 so I offered £19,000. The seller rejected my offer and advised he had already rejected a trade offer of that amount. I increased my offer to £20,000. He rejected it.
I acknowledged the seller’s desire to get the best price he could and advised that I would stay in touch and if it was still for sale in 3 weeks’ time we would talk again.
The weeks went by and I noticed the car was still for sale, but now at £22,500. I offered him £20,000 again. He rejected my offer again and said the lowest he could accept was £22,000.
The weeks went by and I noticed the car was still for sale at £22,500. I contact him and offered £20,000 again and this time he said the lowest he could accept was £21,500.
I made the point to the seller that my offer would remain until 1st Aug when it would fall by £400 and again to 1st September when it would fall by another £400. I made the point that the risk for him was that I might find another car in the meantime and he would still be left with the car.
A few days later the seller came back and accepted a revised offer of £20,175. I bought the car the next day. Because the car had outstanding finance of £22,400, the seller had to stump up £2,200 in order to enable the finance to be cleared with my funds.
I’m very happy with my purchase and the seller is happy he has now sold his car and cleared the associated finance.
So, what are the lessons from this story?
Knowing exactly what you want, why you want it and how much you are prepared to pay (or sell for) helps focus your mind on how to negotiate any transaction.
Doing proper research will help you get a good feel for the market value and trend and help you formulate a sensible offer (or selling) price.
Having the time and space to walk away from a deal is key to getting the best terms. You want to be a patient buyer (or seller) and find a ‘motivated’ seller (or buyer) who wants the cash (or item) more than the highest (or lowest) price.
Your offer should not be influenced by the price the seller is asking. Something is only worth what someone is prepared to pay, not what someone is asking for it, thinks it is worth or paid for it. My original £19,000 offer was based on my research and the value to me, not the £23,000 the seller was asking.
My low £19,000 anchored the seller to that number so that all my subsequent offers were seen as an increase from that amount, not a reduction from the original £23,000 asking price.
Having the cash (or pre-approved borrowing) to do a deal quickly usually strengthens your negotiating hand.
By acknowledging the seller’s desire to get the best price and empathising with their predicament, you build rapport and improve their inclination to deal with you.
Setting out how your offer might get worse over time if they don’t conclude a deal now appeals to the human desire to avoid loss and receive immediate gratification.
Even if another buyer offers more, there is always the chance that they don’t complete the deal and you’ll be back in contention.
Many British people don’t like to negotiate when money is involved. But as long as you are polite, rational, open and honest with the seller (or buyer), you have absolutely nothing to lose. The worst that can happen is you get a no.
Paying less for something (or selling it for more) is the same as earning money. Just think how long it takes you to earn the amount in question. When you think about money that way, your desire to negotiate increases.
Do let me know how you get on with your own negotiations.