Negotiate a big purchase on its total cost and walk away when the deal is wrong.
Daniel is going back to the car showroom from Lesson 6.1, The pressure tactics you will meet. This time he is ready for the deadline tactic and for the manager in the back office. Before either comes up, the salesperson asks what monthly instalment he would be comfortable with. Daniel says about S$900 (an example figure). The salesperson smiles and says, "We can definitely work with that."
That reply should worry Daniel more than any pressure tactic, for reasons set out in the financing section below. The same preparation works for any big personal purchase, such as a car, a laptop, a sofa or a two-year phone contract. It is for purchases where the price is large enough to be worth an afternoon of careful negotiation.
Showrooms and shops are designed to make decisions feel urgent and easy, so decide your limit at home before you go to the shop, not while you are there. Your walk-away price is the most you will pay for that exact model and specification, all in. Use the same thinking you used in Lesson 2.2, Set a reservation point and a target.
Also decide your alternative in case you cannot get that price. You could buy from another dealer, buy a different model, or wait.
Then gather evidence. Print or screenshot prices for the same item from other places: other dealers' quotes, online retailers, and the official price list if there is one. A salesperson can argue with a vague complaint like "that seems high". A printed competitor quote for the same item is much harder to argue with. For electronics, check the same model's price at two or three shops and online before you go. Note any differences in warranty or bundled items so that you compare like with like.
The monthly instalment is the easiest number for a seller to make look small. A longer loan lowers the monthly figure but raises the total you pay.
Say Daniel borrows S$60,000 at a flat interest rate of 2.5% a year (example figures, with the rate picked only to show the arithmetic). With a flat rate, interest is charged on the original loan amount for every year of the loan. On a five-year loan the interest is S$7,500, so he repays S$67,500 in total. Divided by 60 months, that is S$1,125 a month, which is over his S$900.
On a seven-year loan the interest is S$10,500, so he repays S$70,500 in total. Divided by 84 months, that comes to about S$839 a month. This fits under Daniel's S$900, and it is probably what "we can work with that" means. The seven-year loan costs him S$3,000 more in interest than the five-year loan.
To avoid this, negotiate the total price first, as if you were paying cash. Bring up financing only after the price is agreed. When you compare loans, compare the total interest across different loan lengths and different lenders, rather than the monthly figure. Car loans in Singapore are subject to MAS rules on how much you can borrow and for how long, so check the current limits before you plan around a particular loan. The same rule applies if you finance a sofa or a phone: ask for the total you will pay over the whole term.
Sellers often have more room to add things than to cut the price. A price discount is visible, sometimes to the seller's head office, and it may be limited by policy. Add-ons such as accessories, a servicing package, an extended warranty or delivery may cost the seller much less than they are worth to you.
So once the price is close, stop asking "can you do better on the price?" and ask "what can you include?" Daniel could ask for a servicing package, window film or a longer warranty. On a laptop you might ask for a bag, an extra charger or extended cover. This is the trading currency idea from Lesson 3.2, used at the shop counter.
Phone and broadband contracts are a smaller version of the same negotiation, and you go through it more often. Start a few weeks before your contract ends, not the day after.
Before you contact your provider, find two or three competing plans. These can come from other telcos, or from your own provider's website, which shows what a new customer would pay. Then call or visit your provider, ask what they can offer to keep you, and name the competing plans and their prices.
A retention offer is what a provider offers to keep an existing customer. These offers are often better than the advertised deals, but you are unlikely to hear about one unless you ask. You can only tell whether a retention offer is good if you have already checked your other options. If the provider will not come close, your BATNA is to switch.
Pick a purchase you're planning this year and find two competing prices for it. Then decide your walk-away price and three things you will ask the seller to add.
Choose a purchase you plan to make this year. Find two competing prices, then write down your walk-away price and three add-ons you will ask for.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).