Running the 4-Square when Buying a Car
The 4-Square has to be the number one sales tool used by car dealers in the US today, but chances are that unless you have been in the industry you have no idea what this is.
The 4-Square is an innocuous form for the salesman to take his notes on while discussing what car you should be buying.
This is not something to be afraid of as a car buyer, but you should be aware of what it is being used for, and more importantly, to understand how it can be used against you.
The 4-Square is a worksheet, divided into 4 boxes (hence the name, 4-Square), and the car sales person will use this to form their basis for the negotiation on the car deal.
The boxes will cover:
Car Trade-in – how much your car will be taken in part exchange for the new vehicle and a typical dealer will look to have you put a third into the deal, though this is negotiable and can be more or less.
Purchase Price of New Vehicle – this is the dealer’s price for the car, and the sales person will usually write the “price + fees”, so this leaves room for sales taxes, titles and licensing fees plus any other extras you choose to have as optional extras, such as a warranty.
Deposit or Downpayment – how much cash you are prepared to put into the deal.
Monthly payment budget – how high a monthly payment you are prepared to make on the deal. This is a crucial figure for the sales person who will to focus your attention on it – you may be pleased with the high trade-in value offered or negotiated up, but the dealer will try to inflate this figure to counteract this and still take the same profit on the deal.
The 4-Square works because of two things: firstly, when something is written down it becomes a powerful statement for those who read it , and especially if it is a record being made of something you have said. If you tell the sales person your maximum monthly budget is $400, then it becomes very difficult to back away from that figure and the deal is likely to be made using your maximum and frequently, more than that. The second thing the 4-Square does it to give structure to the negotiations, especially helpful for the sales person because it helps them to keep you focused on the key areas which are important to the dealer.
This is simple sales psychology at work in practice, but there are things you can do to make sure you do not get trapped into a negotiating corner and turn the 4-Square to your advantage.
The first piece of advice is to keep the negotiations and the deal very simple. This allows less wriggle room in negotiations by the dealership, so for instance, look at selling your old vehicle separately rather than throwing it in as a part-exchange. Another suggestion is to shop around and secure car financing before you start negotiating on the deal with the sales person. By taking the trade-in and financing out of the negotiation, you have eliminated half of the 4-Square and will probably be getting a better deal for those elements than you could get from the dealer. More importantly, you have taken the ability to manipulate monthly payments out of the dealer’s control altogether – they only have the price of the car to negotiate with and it becomes clear to them that if they want to sell it, they must negotiate on price.
If you wish to go through the dealer for financing (and many do have access to very low rates), or take advantage of the ability to trade your old car in, then do yourself a favor – work out the numbers for yourself using your own version of the 4-Square.