Negotiating is an important personal finance skill that can help you earn more and pay less. Whether you're discussing a job offer, working at a car dealership or just trying to work out a budget with your significant other, the ability to bargain effectively can have a huge impact.
The best negotiation tactics allow both sides to win, said Kwame Christian, host of the ‘Negotiate Anything’ podcast. Confrontational approaches – debating, badgering or insisting on your own way – make other people defensive and less willing to come to an agreement, Christian adds.
How do I negotiate a better salary?
Most managers expect job candidates to negotiate their salaries, but many people don't even try when they're offered a job, according to surveys by Robert Half, a US-based human resources consulting firm.
You can prepare for your negotiation by checking salary ranges at salary comparison sites, company review sites such as Glassdoor, or Robert Half's salary guides.
“People make the mistake of not preparing enough, and that's one of the single best things you can do to be effective in a negotiation,” adds Christian.
Good negotiators also write down a strategic plan that outlines what they want and how they intend to ask for it, as well as a list of good alternatives, he added.
In general, the person with more information should make the first offer because that's the “anchor” around which the discussion will revolve, Christian further explains. Wait for the person hiring you to name a figure so that you don't inadvertently ask way too much or too little.
(If you're negotiating a raise for a job you already have, you probably have as much information as your manager and can be the first to name an amount, he added.)
Settle on the salary before switching to other forms of compensation, such as a flexible work schedule, a new title, the ability to work remotely and paid time off, he recommended.
“If you start off with the creative options, they might feel like they've given you enough,” said Christian.
Understanding how to bargain a better rate for a car
In most negotiations, you'll want to preserve a good relationship with the other person. Buying a car, however, is typically a “purely transactional” interaction so you can bargain harder, added Christian.
Research the car you want thoroughly before you go to the dealership. Look for the invoice price on car comparison sites and ask several dealerships to give you their best price on the car.
“Find the lowest-price comparison, and then use that as your starting offer,” Christian recommended.
Knowing your bottom line - the maximum you want to spend on the vehicle - is particularly important because dealerships will often draw out the negotiating process to wear you down and get you to pay more, Christian noted.
“I need to know very clearly what my walk-away point is,” Christian explained. “And it seems so obvious, but people don't do this.”
Negotiating with private car sellers
Buying a used vehicle from a private seller may be an option if you plan to pay cash. But consider how much a private seller is likely to charge for a vehicle versus a dealership.
Depending on the seller, it's possible that you may be able to negotiate them down on the price if they have a fairly urgent need to sell. On the other hand, if a seller claims there's no pressing reason for the sale, other than wanting to get rid of the car, you may have a tougher time talking them down.
In terms of where to set your negotiation starting point, it may be helpful to choose a set amount that represents the absolute maximum you're willing to pay. Then you can set your starting price below that amount so you have room to work your way up.
For example, say you only have Dh20,000 to spend on a used car. You come across a great car that's priced at Dh25,000, which is just out of your price range. If the seller gives you an opportunity to make an offer, you could start at Dh18,000. From there, you and the seller can continue bargaining until you reach the Dh20,000 mark that you're comfortable paying.
Mention a competitor's lower price is a strong bargaining move; a little research online beforehand will tell you whether the retailer you're talking to is offering you a good enough deal.
But be aware that competing offers may not necessarily be the lowest actual price; there may be hidden costs such as delivery or other surcharges that mean the supposedly 'cheaper' price you've found is not in fact cheaper at all.