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Car Purchases in the context of Negotiation Class

My summer quarter at the University of Washington ends this Friday, and I’m registering only a sense of relief. Despite the pleasure of easily getting very good grades (they give extra credit?!) and the satisfaction of rounding off a classical studies minor, I’m pretty tired of the school routine. Part of it is due to the utter incompatibility of my coursework (history, geology, etymology) with my immediate future, but also I’m missing all the friends at Penn that make college fun.

So this weekend I bought my first car, and did most of the negotiation myself. It was actually an interesting application of my negotiation and dispute resolution class at Penn that I took with Professor Bergman. From an intellectual standpoint, I could draw a lot of parallels from the class to the tactics which they used.

Afterward, I jotted down some thoughts on car negotiation in the context of the negotiation class and various readings on human psychology. Car buying seems to be a primarily distributive negotiation, but they definitely use a lot of standard negotiation tactics 🙂 :

  • The true bargaining range is concealed despite thinking that you have full information, since dealers are capable to part with cars at below invoice and still make a profit.
  • The question “Can I ask you to do me a favor?” was really effective if you actually say yes to the task. There are lots of studies about the effectiveness of asking someone to make a commitment.
  • The backoffice sales pitch for warranties and maintenance packages is really an example of “The Nibble,” where you try to introduce more items into the bargaining mix at the last minute once the deal is wrapped up. Moving companies also do this- once you make the relatively large commitment to rent one of their cheap trucks, they sell you all the supplies at a big markup.
  • It is possible to gain leverage against the salesperson by introducing an offer for referrals, promise to stop shopping around, additional services. This is the deadline/delay tactic of using time to pressure an opponent, as well as using commitment as a means to secure cooperation.
  • We got the good cop / bad cop from the sales people. They also sometimes ostentatiously play on sympathy (kids, family) to get greater concessions.
  • All the “consult the sales office” stuff is an exercise of the limited authority strategy. Also, the salesperson can pretend to be on your side against the big bad sales manager.
  • Salespeople have you test-drive a car and try to narrow down the choice to one car. After you’ve driven it, it creates a sense of possession, “my car” and afterward they keep on referring to it as yours. Studies have shown that you attach a higher value to things you feel as if you possess.
  • Salespeople try to exploit reciprocity by giving you beverages and treating you nicely (i.e., opening doors). In doing so, you instinctively want to be nice to them too. The easiest way to combat this is to realize that it is a strategem and consciously discount their treatment.
  • Realizing that the sales system is a tradeoff of time against purchase price means you can bargain people down. They are also terrified that you will walk out of their dealership if they don’t get you now, and buy from someone else. As a result of this, it’s possible to demand price concessions to compensate for unideal features of a car (e.g., they don’t have the right color on the lot).
  • Good to set a low reference point and move up. Start ambitious, and only increase in small increments because if you increase at large increments, it sends the signal that you are willing to concede a lot more.

Having knowledge of my own preferred negotiation style meant that I could shop around dealerships until I found someone who I could feel comfortable bargaining with and avoid some the aggressive jerks that I talked to.

Practically, and only tangentially related to negotiation in the context of information-gathering, Yahoo! Auto and Edmunds (especially their forums) were the best for getting information on a reference point for how much one should pay.

Overall, negotiations was a dibly useful and interesting course. It was also a lot of fun because we had to do a series of negotiations in every class session. I recommend it to Penn students as an elective, because you don’t even realize that you’ve learned a lot until you apply it to real life. If you can’t take a class on it, good reads are Fisher and Ury’s Getting to Yes, Shell’s Bargaining for Advantage and a great consumer behavior book I read recently, Cialdini’s Influence: Science and Practice.

Ada Chen