Buying with BATNA: Gone in 60 seconds

After buying five cars, and selling three of them, I know that the whole process of purchasing or selling a car can be a bit daunting; from greedy salesmen to lack of knowledge – there are a raft of reasons to feel overwhelmed and helpless. You see, it’s all down to negotiation, and there’s a golden rule that can help you.

DannyDevitoinMatildaPhoto-683x450

Image courtesy of blog.speedbilly.com

Whenever I’ve sold my car, I always do my homework and check out the competition. I’ll get four or five different quotes, so that I can negotiate the price with the buyer. If I don’t achieve the price I want, I’ll be annoyed, however, I know that I won’t regret my decision to sell, based on a quick impulse, later. I believe it’s all about being happy with your decision.

buying-a-car

Image courtesy of genxfinance.com

With new car sales on the rise for the twelfth consecutive month, the UK is swerving the declining European market trend. New registrations have risen over the past month, gaining a 7.9% increase compared to February 2012 figures. It is then surprising to learn that the majority of car purchasers are private buyers – and I reckon this could all be down to the power of consumer negotiation.

Buy-a-car-the-easy-way

Image courtesy of carbidoff.com

So, that golden rule?

It’s called your BATNA: Best Alternative To Negotiated Agreement. This is your ‘insurance’ where you work out your other options if you don’t get the car for the right price (or sell it for the right price).

Picture the scenario. I’m selling my 2001 Ford Focus. I want around £1000 for the car – I’ve advertised it at £1200 – and a potential buyer ‘Dave’ is on his way over.

Ford Focus Mk1

Image courtesy of carwallpapers.ru

The stronger my BATNA, the more power I will have if an acceptable agreement is not made; The BATNA is my ‘ace card’ and to get the best out of the selling negotiation, I need to think of the alternative options that I have, should the negotiation not go in my favour. This could be a number of things. It could be the fact that I have already got an offer of £900 from a local dealer, or it could be that I have another potential buyer coming to view the car this evening.

Tyre-kicker

Image courtesy of inter-activ.co.uk

Now, when ‘Dave’ arrives I have the leverage to negotiate the price having assessed my BATNA. If ‘Dave’ offers me £850 for the car, I know that I have two alternative options to consider and I won’t accept. ‘Dave’ offers me £950 – higher than my dealer offer, yet I still have that evening viewing. I now have to assess my BATNA again – I can either accept or tell him about the evening viewer.

car-deal1

Image courtesy of missouridealerblog.com

Dave can either raise his price or stick to his £950 offer. Either way, I have to weigh up my alternative options. I decide to accept his bid as it is higher than the dealers’ amount, and there is always the risk of getting a lower price from the evening viewer.

Your BATNA will ensure that you leave a negotiation confident that you got the best out of the situation. If you have to walk away – walk away. Autotrader provides buying and selling advice on its website for those who want to know more. And once you have determined your BATNA, Used Car Expert has some great tips and advice on how to handle to overall selling experience

Can you think of how negotiation helps in a purchase agreement? Are there any downsides to assessing your BATNA?

I’d be interested to hear your thoughts

JR

8 thoughts on “Buying with BATNA: Gone in 60 seconds

  1. Hi JR

    Nice blog post. Never heard of BATNA before, but I can see how it might work. If both the seller and the purchaser have set goals in mind and are adamant about their price points, is there a conclusion that could be made so that both parties are happy? As i say, I’ve not heard about this method before, just curious to know if there’s a possible flaw in it, or if its a solid win win situation?

    I work for a family run Car Dealership in Surrey and we deal with various types of customers on a daily basis. We have to negotiate prices on vehicles – especially used cars – as people expect an immaculate motor – therefore will try and knock hundreds to thousands of pounds off the list price of a second hand vehicle for a whole host of reasons. I believe that there is a limit to how far I will negotiate, or someone can negotiate. I find that if you are pleasant and polite, that will make me want to open up the possibility for a price decrease or throwing in extra benefits. At the end of the day we still have to make a reasonable price margin and hit our sales targets, so why should I help you out if you are not making my life easy and being pushy? I will always speak to my manager on behalf of a customer if they have been a pleasure to deal with so far.

    The addition im hoping to make to your blog is from a personable angle in the sense that first impressions count and being polite and pleasant gets you further. Being like this, makes it much easier to get what you want and opens up the possibility of a customer leaving with the car they want and us securing a hassle free sale.

    I hope this makes sense – Ben

    • Thanks for your comment Ben,

      Basically, in a nutshell BATNA is your lowest acceptable variable – it’s not your bottom line – otherwise the negotiation could go rapidly south and come to an abrupt end. I know that there is such a thing called WATNA, which is the worst alternative – I think that this is a rather silly term, as although this may force you to be realistic, there’s no way (for example) I’d sell my car for £500 if i knew it was worth double that – however, this IS your bottom line, but BATNA pretty much is on your side!

      As you mentioned, you have to adhere to your own price margins and hit targets at work, so both parties will have their own appropriate BATNA – You will have to make sure that you don’t sell the car at a super low price, otherwise, your manager would probably have something to say about that! It is possible to achieve a happy medium between both parties – My next blog post focuses on integrative bargaining, which leaves results in a win-win for everyone, so check that out and that’ll explain more about that process.

      I agree that the nicer you are, the more opportunities you could have to negotiate and successfully! However, do you think that if you are too nice, you could be taken advantage of?

      Josh

      • JR,

        I’ll check that out! As far as a sale goes, you can never be too ‘nice’ – and I know what you’re getting at. From a car sales point of view – at least from where I work, we treat our customers with respect regardless of age, race or gender. Unfortunately, in my industry, there are a few cowboy traders who should not be dealing with the general public, and in those cases, yes, if someone is naive and too trusting, they can be taken advantage of. I think your video tells us a little about how to prepare for selling your vehicle: The obvious of keeping a car clean, tidy and having the full service and inspections neccessary in order helps. From what I understand, the BATNA part can only mean one alternative? Or can that extend to many alternatives? Because, aside from picking your options, you could always negotiate that the car has low mileage, fresh MOT, one owner etc.

        Another point I wanted to make was that you have to be realistic with what you are expecting from the whole sales process. I know you pointed out that the whole Best alternative, isn’t the final or bottom line of the deal, therefore it takes a person a lot of resistance to avoid giving in early. In order for the BATNA to work, I feel as if the buyer or seller have to be very assertive (obviously not pushy like we discussed the last time) and I don’t know if many buyers or sellers would have that ability, especially if they are desperate for a sale?

        Ben

  2. Hi Josh. BATNA is actually a very good idea to consider. It is a win-win situation. However, the downside of using BATNA is that you won’t take any more risks, and as far as I am concerned risks are sometimes the driving force, that impels us to do better, to want more. They may not always stir us into the right direction, but imagine if your evening buyer is willing to pay 1000 or even 1100 for your car. Wouldn’t that be quite something?

    • Hi Andreea, thanks for your comment! It’s definitely a win-win situation, however if someone is far too aggressive and will not compromise, then the negotiation will fail. I think there has to be a degree of mutual understanding between both parties, and a sense of realistic outcomes. As I said to Ben, who commented before – there is such a thing as WATNA – your WORST alternative. I think this is ineffective as I personally don’t believe you should settle for your worst option, and that is very risky. If you are desperate to sell, you could be forced to give in to your WATNA – surely thats a lose:win ratio of seller to buyer?

  3. Pingback: It pays to negotiate & bargain | RolesRelations

  4. @Ben,

    Your BATNA ideally is only one alternative, your BEST one. There are various factors however that can lead you to your best option. Things such as mileage are part of the negotiating process for sure, they are what you can justify the bargaining or negotiation with. So you can say that your car has got a full years MOT, four new tyres and a full tank of petrol – this will help build a case for the price you want to sell at. But you have a back-up just in case the buyer doesn’t want to pay full price, in which case you have room for negotiation.

    I agree that you have to be realistic, and if you are in a rush to get rid of your car, I think determining your BATNA is crucial! Even though I may need the money, I wouldn’t sell it to the first person who views it, unless they paid me the asking price or close to it. You have the risk of rushing a decision without determining your BATNA and being the party who loses out.

    You’re going to get pushy people, and yes they probably know what they want and how they’re going to get it, but that shouldn’t stop you from having your own goals and limits. Next customer you get in the showroom, I bet you’ll be wondering if they have assessed their BATNA, or whether they’ll just give in under the pressure?!

    Fisher & Ury have another set of principles, similar to the ones in my post – why don’t you check those out here: http://www.colorado.edu/conflict/peace/example/fish7513.htm

    JR

  5. Hi JR

    I like the idea of BATNA, it’s an interesting concept. More people should give it some thought as I think many don’t plan and just leave things to chance when buying and selling a car, or worse just accept the first offer that comes along regardless.

    There’s a related blog on car deal negotiation, ‘The Psychology of the haggle’ here http://clevercarbuyer.com/blog/negotiation-the-psychology-of-the-haggle-2/

    I’d be interested to hear your views!

    all the best for now
    Mark

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