andertoons6483 largeThe Law of Terms says: The terms of payment can be more important than the price in a negotiation.

Many products, such as homes and cars, are sold more on the terms of payment and the interest rates than on the actual price or even the product itself. People usually buy the most expensive home they can qualify for. People buy the most expensive car they can afford in terms of monthly payments. [quotesright]Your ability to vary the terms can be the key to success in a negotiation.[/quotesright] For example, I remember the first time I purchased a Mercedes Benz. The salesman, a real professional, showed it to me and urged me to buy it. I loved the look of the car but I told him that there was no way that I could afford it. It was too expensive and my income wouldn’t allow it.

My mindset was based on my previous experiences of buying cars, all of which had been financed over a three-year period. Over three years, the payments would be out of my reach. The salesman then pointed out that, because it was a Mercedes and would hold its value, it could be financed over five years rather than three. He then calculated what the monthly payments would be on a five-year amortization. In addition, by purchasing it through my business, I could deduct both interest payments and depreciation. [quotes]As soon as I saw the actual number, I did a complete turnaround and agreed to buy[/quotes] the car, even though the price was far higher than I had envisioned paying.

The terms were more important than the price.

In another example, a friend of mine became extraordinarily successful as the general sales manager for a large home construction company. His strategy was very clever. He realized that people did not buy homes, they bought down payments and monthly terms. Instead of advertising the attractiveness of the homes and their sales prices, as his competitors were doing, he advertised the monthly payments required to purchase one of these new homes. His sales literally went through the roof and he became one of the highest paid people in his profession.

The first corollary of the Law of Terms says: “You can agree to almost any price if you can decide the terms.”

If you are negotiating and you really want to purchase the item, or sell it for that matter, and the price is the sticking point, [quotesright]shift the focus of your discussion to the terms[/quotesright] and see if you can’t negotiate terms that make it possible for the price to be more acceptable. Here’s a true story that illustrates this strategy:

Two older businessmen owned land in the Tucson area and one of them sold his land to a developer for a price of $1 million. A developer friend of mine wanted to purchase the land belonging to the second businessman, which was not as good a piece of land, but the second gentleman also wanted a million dollars. As a matter of pride, he didn’t feel that he could accept less than his friend had received for his land, even though his property was not as attractive or as well located.

In negotiating the terms however, it turned out that the seller didn’t need the proceeds from the land. In fact, they would harm his tax position. He was actually planning to leave the land to his children and grandchildren.

So my developer friend agreed to pay $1 million for the land, but with no down payment, low annual payments and a balloon payment at the end of 20 years. On that basis, the real, amortized cost of the land to the developer was considerably less even though the sales price was listed at $1 million. The older businessman was satisfied and the sale went through very quickly.

The second corollary of the Law of Terms says: “Never accept the first offer, no matter how good it sounds.”

Even if the first offer is everything you could possibly ask for, don’t accept it. [quotesright]Act a little disappointed.[/quotesright] Ask for time to think it over. Ponder the offer carefully. Realize, that no matter how good the first offer is, it usually means that you can get an even better deal if you are patient.

The third corollary of this law says: “Never reject an offer out of hand, no matter how unacceptable it sounds when you first hear it.”

A bad offer can be turned into a good deal for you if you can dictate the terms of payment. You can say, “That is an interesting suggestion. It is more (or less) than I had in mind. But let’s see if there is a way that we can make it work.”

How you can apply this law immediately:

  1. Remember that you can get a better deal by controlling either the price or the terms. If the other party is determined to get the very best price possible, you can agree by suggesting terms that make the price acceptable.
  2. Always look for ways to extend the actual payment of money as far into the future as possible. Any delay or deferment of payment, especially if you can arrange for no penalty for prepayment, increases the attractiveness of the deal by lowering the cash outlay in the present.

- from "THE 100 ABSOLUTELY UNBREAKABLE LAWS OF BUSINESS SUCCESS" – Brian Tracy

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