Funny money

In negotiations a range of tactics are used to overcome financial objections. Funny money is a common one. The majority of people have either used this tactic on another person or have had someone use it on them. It works like this: A man goes to a car dealership to buy a vehicle and reaches an impasse with the car salesman regarding price. The man wants to pay $1,000 less for the car than the salesman says is feasible for the dealership. After all, the dealership is already “giving the car away” as some dealerships apparently do on a regular basis since this is a phase a lot of car buyers have probably heard before.

In our scenario, the man wanting to purchase a car is adamant he will not pay the additional $1,000 for the car and he insists that nothing will change his mind. In fact, he’s ready to walk because this is all a huge waste of his time. The salesman then asks the man if he realizes that for a 5 year loan, at an interest rate of 3.5%, it will only cost about $18 more a month if the man pays $20,000 for the car instead of the $19,000 the buyer says is the maximum price he will pay.

Now if the buyer is not familiar with this tactic he may at this point feel kind of silly about arguing over $1,000 because in the grand scheme of things what is $18 more a month? If the man’s budget is tight then all he has to do is skip going to Starbucks for his Cinnamon Dolce Latte a few times a month. It would be a difficult sacrifice, obviously, but that’s all it would take to come up with the extra $18 a month. Put in these terms, there is now a much better chance that the man will agree to pay the extra money because now it has been broken down into smaller increments and the price difference seems inconsequential.

Granted, this tactic does not work on everyone, but it works often enough to encourage its widespread use – especially in real estate when some loans are amortized over the span of 30 years. It can even prove effective on people that know it is being used.


About Melissa Higgins
Client-centered realtor to assist with renting, buying, and selling needs. I work for BHG / The Masiello Group which has a wide range of services to assist in allowing me to help you realize your real estate goals. I serve all of Southern New Hampshire, including Nashua, Merrimack, Bedford, Manchester, Hooksett, Milford, Hollis, Pelham, Brookline, and many others. Contact me to talk about how I may help you.

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