The difference between buying something and being sold something By Christina Mae Olson, CFP®
Last month I wrote about a client of mine who wanted to buy a new Prius. I mostly addressed the issues of negotiating the price of new and used cars but also a bit on how to actually pay for the car. I gave some tips on how to check the actual “value” so you could feel confident you are paying a fair price for the car. The truth is – we really don’t buy a car. What happens in the process of acquiring a car is that we are sold the car.
(NOTE: I’m not making this stuff up about how to buy a car. Check out the February issue of MONEY magazine for a great series of short articles on how to get a great deal on your next car.)
There is a difference between buying something and being sold something. I can buy a box of cereal. The price is on the box and that’s what I pay. It may be cheaper at Woodman’s than at Quillin’s but I know that I have to pay the price on the box. If I wanted to save 25¢ I could drive to Woodman’s but it’d cost me 50¢ extra in gas to do that. These variables are known to me and I can make my purchasing decision based on the variables. I can’t ask the clerk at Quillin’s to sell me the cereal for 25¢ less just because Woodman’s sells it for 25¢ less. One doesn’t dicker at a grocery store (well, maybe on outdated or damaged items).
When I buy something I like to know and quantify all the variables. It’s hard for me to be sold something. I pity the sales person who tries to sell me something. It’s not easy for a sales person to disclose the variables – especially to a buyer who insists on knowing all the variables. For one thing, most of these items that are “sold” carry a commission to the seller. Often, the seller won’t tell you what they are getting paid. The higher the negotiated sales price – the higher commission to the seller. It pays and makes sense that the seller protects that information.
Buying a new car is like buying life insurance. There is really no “true” price for these products. “What you see is what you get,” just can’t be said of cars and insurance (or airplane tickets and caskets). The real value of these products is a mystery. We have to ignore the sticker price and accept that there will be negotiating involved. If I’m not satisfied I’m getting the best deal for my dollar then I will go elsewhere looking for a better bargain. State Farm and Allstate might offer the same superior property insurance but you can bet you won’t pay the same price for the exact same coverage. Why does $100,000 of cash value life insurance cost 50% more at one company over the other? Why can I get a brand new Prius for $20,500 and the next poor soul pays $26,750 (same gadgets and accessories)? It’s no wonder that we are all ashamed and embarrassed to talk about the price we paid for our big ticket items. Who wants to ever find out that they could have bought the same thing for $6,250 less? Why can’t there be one simple and true price for these things?
It just infuriates me to know that there could be literally hundreds of prices on one single item. If an airplane has 250 seats – it is very probable that there are 250 different price tags associated with those seats. I get frustrated when I buy a car, an airline ticket, hotel room or insurance (no caskets yet) and always wonder if I’m paying the least possible amount for my item. Why are 100 shares of Disney just $9.95 through Etrade and $250 through a full service broker?
Money is finite. Once you pay for something it is gone. I believe you are obligated to find the best price for every purchase you make. You owe it to yourself to negotiate rigorously on all the things that are “sold” to you. If you can spend less on an item by fairly negotiating then you must try and do that. $2000 saved now could mean $50,000 to you later if you invest it for your future.
I need to add that, for items which are “sold,” the buyer gets something known as “value added” quality thrown in for “free”. Value added means superb customer service, a birthday card or follow up calls from the sales person. Value added inspires repeat business and loyalty. I can’t tell you how many clients of mine stick with the same broker, insurance agent, and banker or car dealer because of this loyalty. The cost of this loyalty is outrageous – but that’s material for another article.
One spouse of a car sales person contacted me about my last article. She told me how tough it is to be in car sales right now. Cars are not selling and the sales staff is not making money. Her husband is clearing snow off of vehicles, teaching customers how to parallel park, changing tires, helping farmers calculate payloads and delivering gas to customers. He is lucky to be making minimum wage. This is all “value added” stuff that you can’t easily quantify or value in dollars. The fact is that people will continue to buy new and used cars from dealers. You have to decide how much you want to pay if you like, need and appreciate these value added items.
Finally, I’d like to ask this particular car sales person to reveal himself – the LGBT community needs to know about you. It is really hard for gay and lesbian and/or trans customers to walk into a showroom and be treated with respect and dignity. Will you offer transparency in your negotiations and work out a fair deal for us? I’d love to know who you are and give you a chance to offer your “value added” service to our community. There is more to this discussion and I’d like to keep it going. Any other comments, readers?
Chris Olson is a licensed Certified Financial Planner™ Practitioner with a fee-only practice. Sliding fee – no sales! What you see is what you get – judge for yourself on the “value added.” Chris can be reached at 608-525-9818 or CMOney@centurytel.net.
If you have comments on this article, please send them to Chris at the email address above, NOT to the LGBT Newsletter.