I saw an interesting advert over the weekend from Enterprise, the Car Rental company. They are pushing their program to resell used cars in a hassle free, haggle free manner. The idea of flat rate purchasing without the need for negotiation is appealing to many people, who immediately think that they are not going to get scammed when dealing in this manner. The unfortunate truth is that you are going to pay for the privilege of not haggling.
I do understand that haggling is tiresome and stressful. We once spent a month in Egypt on vacation and every single item required negotiation, to the most extreme degree. We found that by the end of the month the best way to start haggling was to retort with 10% of whatever they asked you for, an uncomfortably low bid, but one that allowed you to go up to 30% slowly, which tended to be the proper price.
By the end of it, we were exhausted, and after coming back from a day of Scuba Diving with wet clothes all we wanted to do is buy a T-Shirt and not worry about the back-and-forth. Just give me something at a fair price! But that would never happen in that environment.
I’ve witnessed the same here in the US, negotiation doesn’t need to occur everywhere, but when it is an important part of the culture of the sale it is critical. But since people don’t like the conflict that comes with counter offering 10% of the price that was offered to them, they are drawn to accept hassle free offers, and these same sales people that just yesterday were haggling for a living are allowed to pick prices that they chose, and make a tidy profit on the way.
For example, if a fair market price of a used car is $9,000 a dealership may mark it up at anything from $11,000-$13,000 and use that initial wiggle room for negotiation. A company like Enterprise can pick a nice moderate number such as $10,500, appearing to undercut the market but really just sitting below where the others start their pricing. The customer thinks they have a deal, and Enterprise gets to close at profit, above market value without any need to mark down their prices.
Some other examples of negotiations that have saved me massive amounts of money:
Moving Company: Flat Rate Movers in New York sells on exactly the same principle as Enterprise, no haggling, no surprises. The only surprise for me was when they quoted me $2000 for a move which I later completed for $300 for both the van and the team to help me. Yes, I negotiated, yes I tipped them extra (and I covered the price of a parking ticket they picked up when moving me).
Contractor: First quote for my apartment renovation was $75,000, subsequent ones around $25,000 I negotiated down to around $18,000.
Sunglasses: A weird one, but I knocked $50 off the price of my sunglasses in proper Egyptian style: in Bloomingdales NYC they only had one pair of the model I liked; so other people had tried them on (this is very common for them as they carry low stock) so I asked for a discount because of it, it took about 2 minutes for them to knock the price down by $50.
I understand that ‘paying a fair price’ is ideal, but companies are preying on your fear of negotiation and haggling and you are losing out because of it. My solution is to completely separate the price from the service. Asking for lower doesn’t mean you don’t value the service or product, it is a simple budget question. You love the product, but you cannot afford it at this price, lets change the price so we can agree and move forward.
Also, Enterprise may still have some bargains, but I would advise when buying from a rental company that you focus on larger, more expensive models or unusual vehicles as these can be rented less frequently than the standard and mid-sized economy cars.