Most businesses don't buy anything big without performing "due diligence" — the thorough homework process of checking things out. It's also a good idea for consumers thinking about making a large purchase.
The old adage, "an ounce of prevention is worth a pound of cure," is particularly relevant when making a large-ticket purchase, whether it's a new refrigerator or a car or hiring a contractor to make home improvements.
In general, the seller already knows how much profit they want to make, so a buyer can level the playing field by investigating the situation. Information is power. While salespeople can and do impart much helpful information, what they don't disclose gives them a critical advantage over a consumer walking in unprepared.
How Consumers Can Optimize Buying Power
- First, decide exactly what you want and what you can afford to pay. This isn't the seller's decision. This most basic step puts you on an independent path. You should buy when the price is right for you, and not any sooner.
- Ask family, friends and other trusted people for advice based on their experiences. Gather information about potential sellers and the item or service you're purchasing. Listen for similarities among the stories.
- Review product test results and other information from consumer experts. There are many websites and publications that rate both local and national vendors and manufacturers.
- Get advice and price quotes from several vendors. Typically, for work on homes, consumers should get at least three bids in writing, but more can be better. Wise consumers often throw out the highest and lowest bid, assuming one is overcharging and the other will not deliver quality work. Weigh these factors against the contractor's local reputation and skills.
- Make sure that home repair workers and companies have all necessary licenses and insurance.
- Check out a company's complaint record with your local consumer affairs office and Better Business Bureau. This is a good way to learn how the company has treated others. Also, ask the vendor for local customer references. Can they name satisfied customers? What do the customers have to say?
- Get a written copy of guarantees and warranties. Compare the features between vendors. Don't sign a contract on the spot without checking it out first. Good vendors aren't afraid to wait. Don't give a large deposit up front, since unscrupulous vendors have been known to take the deposit and run.
- Get the seller's refund, return and cancellation policies up front in writing. You should have an alternative in case the product doesn't perform as expected — unless the price is so low that some risk is expected. If the price appears too good to be true, it likely is.
- Watch the cashier or check the receipt as your order is rung up. Sometimes retailers fail to update cash register scanners with latest prices. If you think the price is wrong, question it.
- Consider paying by credit card. This enables consumers to dispute a charge if there are serious problems with the transaction and puts the onus on the seller to prove legitimacy to the bank.
- Don't buy on impulse or under pressure. Spend only when you're satisfied with due diligence. It's not about the vendor's sales quota, but customer satisfaction.
Know Your Options
It might also be advantageous to secure any needed financing before negotiating with the vendor. For example, when buying a car, it's a good idea to walk into the showroom with a favorable interest rate in mind after talking with your local bank. Having financing in hand may make the process a little easier. Know your options even if the vendor provides its own financing.
