The following is a staff post by My University Money.
Repeat after me: Everything is negotiable. This is one of the coolest personal finance tips that I have ever been given. I don’t have much interest in clipping coupons, or shopping for eight hours looking for that perfect deal on a basic product I want to buy. For some reason however, I enjoy looking at expenses that others take for granted, and applying the concept that everything is negotiable to them.
There are a ton of people that just accept the arbitrary fees and ridiculous business practices that get applied to them daily, and they simply don’t have to. The whole idea that someone would spend hours cutting out coupons, but meekly accept the bank’s first offer on mortgage rates is crazy to me. One of the tactics I have specifically used to great advantage in negotiations playing the lifetime loyal card. Basically, reminding the company you are dealing with that you have a lot of business with them, and while you would really like to stay with them, there is this offer from another company and…
Negotiating to a mutual advantage
One area where this proved especially effective was when I went to purchase a vehicle after university. Each dealership I went to I mentioned, “I’m not much of a car guy, so as long as the vehicle treats me right, I’ll definitely be back here for another one. Oh, and we’ll probably be looking for another vehicle for my wife in a couple years too.” Car salesman make a living off of repeat customers like that, that will come specifically to them.
None of them knew I planned to buy a small car and drive it forever when we first started negotiating back and forth, I’m sure they figured I’d be looking for an upgrade pretty soon like most consumers. Let’s just say I didn’t say anything to discourage this thinking. Car dealerships look at that long-term picture all of the time. After all, a meaningful connection with a young couple could be very lucrative over the next twenty years.
After getting some interesting “throw-ins” from several dealers (some of which I would have never thought about asking for on my own) I went to one that had the car I really wanted and I more or less asked him to match all of this, as I consistently reminded him that my wife was more a fan of that other company so she wanted to go there, but I was trying to persuade her this company was, “Full of good people.”
Loyalty can be expensive if you don’t take advantage of it
Another are where this loyalty and comparison tactic can be effective is through banks. Banking is a business model that depends on your loyalty/laziness to maximize their profits. They know that once they hook you in for a mortgage, you will likely go there for other loans, and hold a monthly account there as well.
Get creative when you negotiate. I have seen plenty of people get their monthly checking account fees whipped away just for renewing their mortgage (think about how valuable all of that interest is to the company) and asking for it. Another interesting strategy in the whole mortgage game is to approach a couple direct competitors about switching over. Many salesman and employees will get big commissions if they can poach another bank’s mortgage. In order to seal the deal they will throw all kinds of stuff at you in addition to the absolute bare-bone interest rate that they can offer. Get this in writing “For your wife to see” or whatever, and then show it to your old company.
Remember the line, “I have always dealt with _____ and I would like to keep dealing with you guys for the next 20 years, but you have to be competitive with this offer I’m getting from _____. They gave it to me in writing that ______, and they said they could probably do even better if I moved my other accounts over there.” This will send all kinds of alarm bells off as no one wants to be responsible for losing someone with multiple accounts, and I guarantee someone will labour on your behalf to get you a much better deal than before. Even a couple tenths of a percentage point can be a substantial amount of money when you are looking at a large mortgage.
This can be applied to other industries as well. Places like insurance companies can be leveraged into providing perks if you make the argument that you don’t have to have all your insurance coverage at one place, but darn it, if you just match this offer, you’ll keep all the rest of it with them as well. I’ve also heard of many credit card companies competing to keep you around, but they aren’t so found of me because I always pay my balance off monthly (therefore I’m not worth much to them).
Just remember that certain key phrases like “lifetime loyalty” carry a lot of weight in the retail sector. Most people will simply renew whatever agreements they have with their financial institution without really looking around, and the banks, auto dealerships etc. know that; consequently, they’ll do everything they can to keep so much of your business, and that can be leveraged to your negotiating advantage.