Money Does Talk!

When buying something, you can buy in one of two markets. The first is buying on terms in the retail market and the second is buying in the wholesale cash market. This can be illustrated by referring to the biggest purchase we all make in our lifetime - Real Estate.

In recent years, when you are buying a house it is easy to get financing of the first mortgage, so the seller is not forced to finance the whole sale. What I mean is the seller doesn't become your first mortgage holder, the bank lends the money and the seller get the cash. Moreover, he will most likely make some concessions if he doesn't have to carry back a second trust deed.

Therefore giving the seller all cash, will usually get you a better deal than asking the seller to let you buy the house with a very low down payment, with him carrying back a sizable trust deed. The big savings come when you are buying real estate that doesn't have easy institutional financing available. The purchase of vacant land can be the best example.

My father was interested in buying industrial lots in the city of Montebello, just east of downtown Los Angeles. This was during the 1960's. In those days it was common for a buyer to put down 20% and the seller to finance the remaining 80% for 10 years at 8% interest. For example: a $10,000 lot would cost you $2,000 down with $97.06 payments every month. After 10 years the total of the principal and interest payments would be $13,647.45. If you wanted to build on the property you had to pay off the land loan, first. The sellers then would not have to wait the whole 10 years before getting all their money.

Many property owners sold their property because they wanted money and getting the $2,000 wasn't much money to them. So, my father would offer $5,000 all cash to the sellers. More than 1 out of 5 would take the cash up front instead of waiting for payments over 10 years. By offering the extra $3,000 cash down, my father saved $8,647.45 on the sale ($5,000 on the price reduction, plus the interest on the note). Now that is buying wholesale!!

Buying cars can be done the same way. When you pay retail, the dealer talks monthly payments. If he lowers the price, he'll raise the interest rate. When you are buying for cash, he can only talk price. When you are leasing an automobile, they don't even tell you the price!

The major consideration in leasing a car or not, is made by the leasing company to be all about what the monthly payment is going to be and how much extra it is going to cost you when you drive over 12,000 miles per year. Ever financed a used car from a "no credit check" dealer? He gets you for 36% interest on the balance you borrow, after getting a 50% down payment from you. Then if you miss a payment he takes the car and sues you for the difference. Buy what you can afford in cash and save making the lenders rich.

I read a report once that said that the average man makes $1,500,000 over his lifetime. Of that amount, he uses $600,000 to pay the interest on his purchases. Let's look at the purchase of a home, from a slightly different point of view. A man who makes $1,500,000 in a lifetime will be earning on average about $30,000 a year or $2,500 per month.

He can afford to spend 40% of his income on rent or a mortgage payment. This means that he can afford a $150,000 house. If he can qualify for a 90% loan he would owe $135,000 at 8% amortized over 30 years. That means he pays $221,609.58 interest plus the $150,000 principal to buy this one house and pay it off over 30 years. The interest alone is almost 15% of his lifetime earnings! Buying anything on credit can cost you more than the retail price because you must add the interest to the cost of the item.

My suggestion. Buy for cash and negotiate for the best price you can get. If you must borrow, pay it off in as short a time possible. Also, never borrow for personal consumption. Postpone the purchase long enough to pay cash. If you can't afford to wait until you save the money, you shouldn't buy the item. It is just too expensive. To buy on payments raises the cost even higher than the cash price, so it becomes even more expensive. So if you cannot afford the cash price, you definitely cannot afford the financed price. My suggestion is to pay cash and buy wholesale. BUY THE BEST, PAY CASH

About The Author

Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetgroup.com/; kismetrei@earthlink.net

In The News:


Wall Street Journal

Whirlpool Hit by Falling Sales Outside US
Wall Street Journal
In China, Whirlpool sales plunged as retail stores stopped buying while awaiting the completion of the acquisition there, which will bring a new product line. Mr. Fettig said the acquisition will give Whirlpool another 30,000 retail outlets in China ...
Whirlpool cuts outlook as China sales plunge ahead of mergerReuters

all 62 news articles »

Wall Street Journal

Gilead Reports Strong Sales of Sovaldi, Putting It on Pace to Become a ...
New York Times
Sales of the new hepatitis C drug Sovaldi reached $3.5 billion in the second quarter, a huge figure that puts it on track to become one of the world's best-selling medicines but could intensify concerns about society's ability to pay for it. The sales ...
Hepatitis C Pill Rockets Gilead Into Big LeaguesWall Street Journal
Gilead reports $5.8 billion in sales of hepatitis C drugLos Angeles Times
Gilead Doubles 2014 Revenue Forecast on Sovaldi SalesBloomberg
MarketWatch -SFGate (blog) -Barron's (blog)
all 93 news articles »

USA TODAY

Existing-home sales hit fastest pace since Oct.
USA TODAY
But sales still trail last year's, and the supply of homes for sale — while improved from May — remains tight, Realtors say. Those factors are expected to contribute to weaker sales for 2014 — 4.9 million compared with 5.1 million last year, NAR ...
June Existing Home Sales Hit Highest Pace Since OctoberForbes
Existing-Home Sales Hit Highest Level Since OctoberWall Street Journal
Wisconsin home sales rebound in JuneGreen Bay Press Gazette
MiamiHerald.com -Cincinnati.com -Bangor Daily News
all 258 news articles »

New York Times

For Apple, iPhone Roars and iPad Whimpers
Wall Street Journal
Despite what new Chief Financial Officer Luca Maestri characterized on the analysts' conference call as "new product rumors" pushing customers to hold off on potential purchases, iPhone sales were at the high end of Apple's expectations, he said.
Apple Reports $7.7 Billion Profit on Strong iPhone SalesNew York Times
With sales sputtering, Apple's iPad looks to IBM allianceReuters
Tim Cook Admits Lower Cost Used iPhone Sales Are Good for AppleeWeek
TIME -Slate Magazine -Apple Insider
all 1,610 news articles »

USA TODAY

Retailers scale back sales expectations for this year
Sacramento Bee
WASHINGTON -- A projected strong second half of 2014 won't be enough to offset the hit retailers took from harsh winter weather, the National Retail Federation said Wednesday, lowering its earlier sales forecasts for the year. The retailers' group now ...
Retail trade group reduces annual sales forecastKansas City Star
Retail sales forecast lowered for 2014 after slow first halfLos Angeles Times
Trade group cuts retail sales forecast for 2014USA TODAY

all 85 news articles »

Forbes

The Golden Arches Lose Their Shine: McDonald's Profit Falls As US Sales ...
Forbes
Is it time to officially declare that Quarter-Pounders are out and burritos are in? On the heels of Chipotle's better-than-expected second quarter results — the fast-casual chain reported a 17% surge in same-store-sales — competitor McDonald's ...
McDonald's Profit Slips as US Sales Lag AgainNew York Times
McDonald's Profit Slips; US Sales DeclineABC News
Wall Street grills McDonald's on plans to improve salesMarketWatch (blog)
Bloomberg
all 218 news articles »

Reuters

Harley-Davidson Lowers Full-Year Guidance on Disappointing Q2 Retail Sales
Forbes
However, the Milwaukee-based motorcycle manufacturer's stock fell by over 5% just after the announcement of quarterly results as the company lowered its full-year shipment guidance on less than expected retail sales. Worldwide retail sales remained ...
Harley-Davidson Upstaged by Polaris in Motorcycle SalesWall Street Journal
Harley Sinks as Annual Shipment Outlook Cut on SalesBloomberg
Harley-Davidson Sales and Financial Results- Second Quarter of 2014Cycleworld

all 129 news articles »

BBC News

GSK lowers full-year forecast after Q2 sales fall
News & Observer
The British company's sales fell 4 percent globally to $9.3 billion, pushed down by a 10 percent sales drop-off in the United States and a 25 percent decline in China, where that country's government is investigating bribery allegations against GSK ...
China Bribery Probe, Dismal Advair Sales Leave Glaxo Shares GaspingForbes
US Takes Wind Out of Glaxo's SalesWall Street Journal
GlaxoSmithKline warns on profits as lung drug sales flagCNBC.com
Bloomberg -Triangle Business Journal (blog) -BBC News
all 145 news articles »

International Business Times

PS4 vs. Xbox One: Microsoft Console Sales Up 14 Percent, Still Trailing Behind ...
International Business Times
Microsoft Corp.'s (NASDAQ:MSFT) Xbox One sales are up 14 percent in its fiscal fourth quarter, according to a quarter-end report on Tuesday. The Redmond, Washington, multimedia brand said it shipped 1.1 million Xbox One and Xbox 360 consoles to ...
Microsoft mum on Xbox One sales; notes 1.1M 'Xbox consoles' shipped in past 3 ...GeekWire
Xbox One Vs. PS4: Sales Doubled For Microsoft In The Wake Of Kinect, But Was ...iDigitalTimes.com

all 162 news articles »

Bidness Etc

Defense giants post lower sales, mixed profits in second quarter
Washington Post
In the second quarter, Lockheed Martin's sales declined 1 percent to $11.3 billion compared to the same period one year ago, while profits grew 3.5 percent, helped by gains in the company's pension accounts. The information-systems segment saw sales ...
Northrop profit rises 4.7% but sales declineMarketWatch

all 61 news articles »
Google News

Stuff We Make Up About Our Prospects

? Go through the "no's" to get to "yes." ?... Read More

Complacency and Fear are Sales Busters

Prospecting is the engine that propels anyone in sales. Without... Read More

Clear Up Blurry Communication

One of the top brewing companies in America is a... Read More

The Art Of Cold Calling

I know, don't groan. You have to do them if... Read More

Doomed Before You Dial?

Several weeks ago, I conducted a "Mastering the Cold Call"... Read More

Why You Buy, Part Three

Still more discoveries from the recent studies in behavioral economics:Over-Valuing... Read More

Casual Networking

What comes to mind when you think of networking --... Read More

Are You a Cultivator or a Harvester?

As a result of providing marketing consulting, training and coaching... Read More

Dress as Though You Mean Business

Could casual Friday be undermining your leadership ability?One of the... Read More

9 Ways to Keep Clients Coming Back For More

A lot of effort is put into getting new clients.... Read More

How to Reach Purchasing Agents of Big Corporations

Now business owners and sales professionals can develop a Faster... Read More

Selling Commodities

"How do you create a perceived value to differentiate yourself... Read More

Your Voice is Your Instrument

On an introductory call, your voice is your instrument. During... Read More

Losing the Big-One: Salvaging Lost Accounts

After careful consideration, we have chosen our vendor, and it's... Read More

Are You a Winner or Whiner?

I've found that winners say "I choose to." Whiners, on... Read More

Create a Magic Connection with Clients, Leads, and Business Associates Part II

Part I of this article explored how strategies of Neuro-Linguistic... Read More

6 Ways To Get More From Your Promotions

1. Settle On The Right Way ForwardThe purpose of your... Read More

Impotent Questions - How Much Are They Costing You?

Last issue we talked about what motivates people to buy... Read More

Restaurant Pressure Washing

Many pressure washing companies try to stay away from the... Read More

3 Ways To Sell and Have Fun Doing It

There are many ways to sell and have fun doing... Read More

Everything in Life is Selling

Robert Louis Stevenson said 'Everything in Life is Selling' and... Read More

The Hands On Approach

While living in the technology age where everything is computerized,... Read More

5+5 = Your Dream

JOHN DI LEMME ON "5 + 5 = Your Dream"... Read More

Nine Keys to Make your Sales Copy Convincing

Would you pay $12,500 to discover the keys to great... Read More

Everyones Favorite Topic - 3 Tips for How To

I believe that everyone understands that no matter what business... Read More