January 6, 2008

They all want your money!

I wish I would have read Harford’s book sooner, before I bought the used car, renewed my health insurance and bought groceries while sipping on my large double shot, half cream, and half steamed espresso with $4 sprinkles. So far I’ve gotten “shafted” on all of these. After reading the first 5 chapters of Harford’s book I will now become a savvier buyer and get less of the “shaft”. The most important thing that I have learned so far is to stop and take a look at what I am buying, who is selling it to me and what are the alternatives. This can give me the upper hand in the deal or give me insight to just how much I’m going to swindled.

Last month I bought a used car and no, I didn’t get the best deal on it but I did get the one I had been looking for, for the last 8 months. I wanted a newer Jeep Cherokee with anti-lock brakes. Turns out those anti-lock brakes on that SUV are somewhat of a rarity in used dealerships along the Front Range, hence my over whelming joy that flooded into me when I found it on a lot down the road from school. So I thought it would be a good idea to convey the message to the used car dealer that I have been looking to buy for a long time and he has exactly what I want. Woops, I should have seen the dollar signs pop up in his eyes but he was a professional and kept his cool. If I would have read the chapter on price discrimination I would have known to keep my damn mouth shut! I just gave up valuable information to him which would allow him too easily to extract every cent I had for the Jeep. I just self-incriminated myself to the fact that I am willing to wait a long time to get what I want and possibly will pay a premium for it when I find it so I won’t have to wait another 8 months to find another one. If I would have just stopped and thought about what I was buying and who was selling I could have kept this information shift from happening.

First, I was buying a car that was hard to find (yes, everyone advertises ABS on them but every time I’ve gone to look they were lying or assuming it had it) and on this lot next to the one I wanted was 6 others without ABS. So I had alternatives but they were not what I wanted, because last year I could have made that corner going down the icy hill and not parked my car on baby Jesus and the tree wise men in the front lawn of a very angry man, if my car would have had ABS.

Second, I should have realized that I really knew nothing about bargaining with a professional trickster. I’ve bought one used car from a dealer six years ago. This salesman does this every day. He knows what to look for and how to exploit it. There is asymmetric information here, he knows what to do and I have no clue. How could I avoid getting into this situation, learn more about it. I could have brought people who know more about this with me to help, or even read a book about it. But I didn’t, because I’m too impatient.
I wanted that Jeep so bad I could taste it. I did haggle a bit and he did come down some. But if I would have sucked it up and just walked away he would have called and offered a lower price. I would have shifted the information balance back into my favor by sending the signal that I’ve waited 8 months a few more won’t hurt (even though it really would have). In the end I got the Jeep I wanted and it is better than I had thought. I have also learned a great deal, coupled with this book and my experience, I could go to any dealership and get the car I want at a price I like. I just have to remember to keep my thoughts to myself, keep salesman in the dark, not let emotions get in the way, and act like they have to pay me to take it off the lot. Remembering all this will keep the dealerships from price discriminating and nativity scenes from getting demolished. Robbe Uhrhammer


Jessica Wade said...

On the upside, you got the car you wanted and obviously it was worth the price (since you paid it). Also, the car salesman surely knew that would he had was in high demand and he could get exactly what he was asking for it with little haggle since there are so few of these cars on the market. If you didn't buy it the customer after you might have, if not more would come tomorrow with very little alternative. Anyway, although you may have gotten a slightly better deal having known then what you know now, I doubt there would have been much difference. Great paper by the way, and hopefully Rudolph and his friends will be safe come next Christmas.

brendon newton said...

Knowledge is power you are correct. However, I would encourage you to take note of what I find to be a very important element or Harford's book. Harford points out very early on that that people may not be getting "shafted" as you put it, rather, other variables are at work that you may not see. Minus the car, you probably didn't get shafted on any of those items because those were items that were priced at the market value for those products. Rather than using the term shafted, I would have said that you are now a more educated consumer whereas before you were not.