Tough Problems: Getting a good deal on rent, a used car

My Psychology Today article today is the latest in the Tough Problems series. In each, I present two composite questions that my clients face and my response to each. Today, one question is about getting a good deal on rent. The other is on how to get a good deal on a used car.

Should You Replace Your Car?

Other than perhaps a house or education, we spend more on buying cars than anything. The average cost of one is now $33,000 plus 68 months of interest. 

Should you spring for one? As my PsychologyToday.com article today, I offer an internal debate that may help you clarify.

Buying a Car at a Great Price...With Ease

My wife wanted a new car. We view a car as basically an appliance, with reliability trumping everything, so we always buy a Toyota.

We went to the company website to look at models, options, and colors and decided on an ES300h.

We then test drove it and loved it but didn't want to buy just yet. We went home and, for $14, bought Consumer Reports' New Car Price Report. That promised to state what the dealer actually paid for the base car plus any options, which is usually well below the invoice price. Dealers may show you the invoice to try to convince you you're getting a good deal but they usually pay far less--the manufacturer gives the dealer money for each car sold that doesn't show on the invoice.

That Consumer Reports Price Report also allows you to request a price, by email, from local dealers. I received prices from a few, then I visited their websites so see if they had the car in the color and with the options I wanted.

I then phoned the three dealers that had my desired car on the lot but I didn't accept their e-mailed price. Instead, I explained that I know that true dealer cost is much below invoice and that I'm calling dealers to get the best price. I reassured the salesperson that I'm a serious buyer and if I can get a rock-bottom price, I'll come in and buy the car immediately, no games-playing. One of them said he'd sell me the car at $2,000 under invoice, far lower than what the Consumer Reports Report said the car cost the dealer! I said, "Email me that in writing and you have a deal." He did and we did.

We love the car.

The Art of Bargaining

You see an item in a department store. The price tag says $100. That's what you'll have to pay. Right?

Not necessarily. What if it has a scratch on it or is shop-worn, or last-year's model? "Speak with the manager, and pointing to the defect say, "I'd be willing to take this if I could get 15% off. Is that fair?"

But what if the product is the current model and is in perfect shape. Are you stuck with having to pay the $100? Ask the cashier, "Is a coupon being offered that could be applied to this purchase?" Often there is. Even if you don't have it, she may have some of those coupons available.

No product defect? No coupon? I might ask, "Do you know if this just came off sale or is going on sale?' Often, they'll give you the sale price now. Or worst case, you can have them hold it for you until it goes on sale whereupon they'll ship it to you.

All those bargaining possibilities are at a supposedly fixed-price department store. Your bargaining opportunities multiply elsewhere.

For example, let's say want to buy something from an independently owned store. If you don't like its price, ask to speak with the manager and say something like, "I really like this but I can only pay (offer 50 to 75% of the sticker price). Can you do that?" If no, say thank you and start to walk out. The manager may call you back and say yes or counteroffer. If you've made it back out onto the street without being called back, you can come back in and say, "Well I suppose I could pay (insert 85% or 90% of the sticker price.)" Of course, this strategy won't always work but it often will. And you have nothing to lose by trying. At minimum, you'll know that if you ended up paying full price, you could not have gotten that store to sell it to you for less. Of course, so many products are available less expensively if bought on the Internet, both because it's easy to price shop and because there's often no sales tax.

How about a really big purchase like a car? Get the TRUE current dealer cost (NOT the widely available invoice price) from Consumer Reports. The term for the true dealer cost is "dead cost." Call five dealerships (especially those in low-rent districts) and ask to speak with the new car sales manager. Do not agree to speak with anyone else. Tell that manager the precise car including color and options you want and ask if they have it in stock or are willing to get it for 3% over dead cost. If one dealer says no, politely thank them and call the next dealer. If all five say no, call them again offering 5% over dead cost. If they all say no, offer 8%. You'll end up buying your car for less money than do 99% of customers. Once you and the manager agree on how much you'll pay for the car, don't get hit up for other costs. You should pay only the agreed-on price plus tax and license; that's it. (No dealer prep, advertising, no nothing.) Also, say no to the dealer getting you the financing or insurance--that's a huge profit center for dealers. Get your financing from the best-rate lender you can find on bankrate.com. Better yet, don't buy more car than you can afford to pay for in cash. That's key to keeping your costs down without significantly degrading your lifestyle. Comparison-shop for car insurance on esurance.com.

Of course, in all bargaining, you shouldn't be a pig. Remember that the seller is entitled to make a reasonable profit--sellers have to live too. But there's no reason you shouldn't try to get a good deal. That's standard practice in business and there's no reason it shouldn't be for you.