My brother-in-law John was a well-respected car salesman in our community. He was unique in his field as those who went to him knew they would be treated fairly.
I went to him one day to buy a vehicle for our growing family. He asked what I was looking for and I laughed as I replied, “A great deal, of course.” In his straightforward way he responded, “There is no such thing as a great deal.” I was startled by his answer, so he went on to teach me a lesson that truly changed my life.
John said a “great deal,” which everyone wants, implies that a vehicle will be purchased for less than it’s worth. It therefore includes taking advantage of the seller. The motivation for such tends to be more ego than financial since everyone likes to brag about their negotiating skills. “Let me explain the car industry,” he said, “and the principle applies to real estate and just about everything else.”
He said there are widely available resources for valuing every single vehicle based on its conditions and features. Sellers know what price the market will bear, and they have little reason to sell a vehicle for less. If it appears they are doing so, it is usually because there is something about it they aren’t telling the buyer. John told me there are only two deals in the car business, fair deals and bad deals. The greatest risk to a car buyer is being so focused on finding a great deal that they wind up being sucked into a bad deal. He encouraged me to buy a high-quality vehicle and be willing to pay a fair price for it.
Investors could learn a lot from my brother-in-law. They are constantly looking for that great deal. They want higher dividends or growth rates than the markets can bear. They continually seek that golden ticket to an easy future. Inevitably, it is that attitude that often sucks them into the worst deals of all.
As I review my investment holdings over my life, it is clear that my best ones came when I followed John’s advice. Whether it be stocks or real estate, my best results came when I was willing to pay a fair price for a high-quality investment. Other people are smart too, especially in the investing world, and they don’t generally sell things for less than they are currently worth. Of course, there are exceptions, but it has been my experience that people who are obsessed with finding “great deals,” are often the ones taken advantage of by sellers. You rarely overpay for a great investment, but people overpay all the time for bad ones.
My brother-in-law John passed away many years ago, but his sound advice has been a standard for financial decisions in my life. The “best deal” usually comes from buying a quality asset for which you are willing to pay a fair price. Following that advice in my financial life has made all the difference. Thank you, John