Cash: The Greatest Bargaining Tool

6 05 2010

Source:moneyning.com
The first experience I had with the difference cash makes when you’re bargaining was when I was trying to get a desk as cheap as possible. The seller wanted about $20 more than I was willing to pay (or actually had). I pulled cash out of my pocket and explained that all I had was right there, and the stack of dollar bills got his attention: he said that, since I could pay cash, he’d give me a $20 discount.
The Cash Discount

Furniture dealers aren’t the only people who offer discounts when you’re willing to pay in cash. I’ve found that any time I was buying from someone who could actually negotiate prices, offering to pay cash on the spot always gets you a better deal. There are several reasons why:

* For most businesses, accepting cash is actually cheaper than any other forms of payment. There’s no need to pay credit card fees or take a stack of checks to the bank when you’ve got cash in your hands. The only businesses where cash isn’t necessarily any less expensive to process are those that are particularly big. Think Walmart: the cash that comes in still has to go through an administrative process to make it back to Walmart’s bank account, but it cost much less for them on a percentage basis than a small mom and pop store.
* There’s no chance that the seller won’t get all of his or her money when dealing with cash. Unlike checks, which can bounce, or credit card payments, which can be stopped, cash means that you’ll get paid no matter what.
* While I would never recommend irritating the IRS, there are some sellers that prefer cash because they can ‘forget’ to report it on their taxes. It’s a bad idea, but it does happen.

All of these reasons add up to the fact that offering cash is one of the easiest ways to get a discount on many purchases.
The Psychological Factors

When you’re dealing with cash, everyone involved can wind up acting a little differently than if you are dealing with other forms of payment. You may be more reluctant to hand over your cold hard cash than if you were using a credit card or even a debit card. Sellers respond to cash, as well: they’d very much like to get your cash into their hands. That can make for several considerations as you bargain.

It’s especially important to know, going in, how much you want to spend. It can be useful to have only that much cash on you — or at least only show that much to the seller. Depending on how hard of a time you’re having negotiating a price downwards, actually bringing out the money can be helpful. That tactic works best with someone not particularly experienced with bargaining — think garage sales, rather than a business owner who routinely negotiates prices.

Of course, using cash means that you do have to plan ahead a little more, especially for big purchases. That’s not a bad thing for your finances, of course, but it does mean that you may need to swing by the ATM before you go anywhere.

Let me ask you. How often do you pay cash, and are you comfortable carrying a big stack of bills around anymore?


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