Filed under: Car Buying
Beware of the Four-Square rip off
If you or somebody you know is looking into purchasing a new vehicle, this is a must read. We know new and used car salesmen can be some pretty slick dudes, but many of us step on the lot with a great deal of emotion and usually little preparedness. Even us car nuts may come in knowing more than the next guy, but a great deal of knowledge about the product you're about to buy may still not prevent you being taken for a ride.Some dealers use a selling system called the "Four-Square" to play psychological warfare with your wallet. They work this confusing system several times per day, while you purchase a new car every few years. Obviously, they're the wolf and you're the sheep.
The "Four-Square" is a sheet of paper with boxes for trade-in, vehicle price, down payment, and monthly payment. It looks very simple, but for most people, it's like solving Rubik's Cube. Former used car salesman Alan Stone gave The Consumerist some tips on how to tackle the Four-Square, and we've got some of our own ideas, too. Hit the jump to see what a Four-Square looks like, and how you can beat the dealers at their own game.
[Source: The Consumerist]
The above image is an example of the Four-Square trap before it gets too messy
The Four-Square is a way for the dealership to perform a slight of of hand that produces them more profit by getting you to overlook the price of your trade-in, the price of the vehicle, or the finance terms of the deal. You may get them to give you more for your trade-in and accept less of a down-payment, but they'll still get you with the price of the vehicle or the amount of interest you're paying every month. Highlighted are Alan Stone's list of things to remember when purchasing a new car.
- Get financing from the local credit union before going to the dealership: This gives you one less thing to negotiate with the dealer. Most people don't have the first clue how dealer financing really works, and a quick call to a few credit unions will get you a set rate with no funny business.
- Only haggle over price with the dealer: The price is the bottom line. If you start arguing over price, finance terms, and trade-in value, they've got you in their Bermuda Triangle.
- Do your homework: Know the MSRP of the vehicle before setting foot on the dealer lot. Most dealerships now have a website with a listing of their new and used vehicles, with price, level of equipment, and mileage (if used). Once you find the vehicle you like, cross-shop other dealer websites for similarly-equipped cars to verify the price of the one you want.
- Let them know you know what they're doing: Printing this post up and showing it to them will go a long way toward getting a more honest deal.
- Understand that you are not going to pay cost for the car. The amount you pay over cost will be more than you think: This is pretty obvious. The dealership is in business to make money. They will never give you the "at cost" price, even if your sister is dating the salesman's brother.
Here are a couple simple and smart things we do when purchasing a new car.
- If you have a trade-in, check eBay to see if you can get a better transaction price than you'll get a the dealership. Chances are, if your car is decent, you will. You just have to decide whether selling the vehicle yourself is worth the hassle. A friend of Autoblog got $6,200 on eBay for a 1998 Ford E-150, and the dealer was only willing to give $4,000. We'd say a $2,200 balance is enough to go through the hassle.
- Bring note paper and a calculator to the dealership. When the dealership gives you terms, just do the math and figure out if they're trying to screw you. If the vehicle costs $10,000 and you're paying $250 per month for 60 months, there's a good chance you can do better.
- Don't go to the dealership in a great-big hurry. If you want to buy a car and get the hell out of there so you can watch WrestleMania on pay-per-view, chances are you won't get the deal of your dreams. If you take your sweet time and spend a couple hours there, at some point the salesman will get to the brass tax so he can move on to the next victim.
- If you have a family, don't bring everybody to the dealership for your big purchase. Chances are they will distract you from getting the best deal possible. They will also say stupid things like "what a great deal" or "that's exactly what you wanted".
- If the salesman asks "What are you looking for with regards to down payment and price?", don't answer him! This is common sense, but not everybody has it. Let the salesman make the offers and you tell him or her if it's good or not.
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Reader Comments (Page 1 of 4)
brandon Leung 8:27PM (4/02/2007)
the four square isn't a game playing tool. it is used to determine the price of the customers trade, price of the vehicle and whatever discounts/additions the vehicle has. what the customer wants to put as a down payment and what their totaly monthly payment will be at.
using these factors dealerships calculate what your payment will be and at what percentage rate. depending on these factors that is how they determine the cars selling price, what your APR is (depending on credit. they need to run your credit in order to determine a correct APR for YOUR case), and other factors to "work a deal"
the place where some dealerships may "trick" you is the total monthly payment. make sure you ask them if this is including tax. most of the time dealerships dont lie (they cant otherwise they'll lose their job) but you still need to check.
the four square isn't a game, just a tool they use so they can effectively sell you a car.
and yes ive sold cars for quite some time so this is why i know.
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Viv 8:30PM (4/02/2007)
Your very last tip about the downpayment and price are the best tips in this entire piece. Most people yell out a random number to that question and it's all downhill from there.
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5 Watt 8:35PM (4/02/2007)
The most powerful thing you can bring to a car dealership is financing. Then the only things you need to negotiate are trade in and price.
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DPC car videos 8:35PM (4/02/2007)
The square game is not so much a game but it is a tool. It is up to you to make it into your advantage. Bottom line is to do your homework before you walk in a dealership for a particular car. The biggest mistake is when you just walk in a random car dealer without being prepared. It's like going into court without being prepared.
http://www.dpccars.com
DPCcars
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Deezee 8:40PM (4/02/2007)
Good info here autoblog. Thanks.
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Mike 8:41PM (4/02/2007)
Oh come on. Everybody knows that dealerships are out there to make money. The way you get around it is not to research all the ways they try to get you to pay as much as possible. I find that going in making assumptions to be more dangerous than going in and walking like you're talking.
I usually select what I want to buy before I even test drive the car. I look at features, I look at power, I look at all of the things a car must be to me. Then I test drive them long before I decide to buy. I play the dealers; see what tactics each uses. Then I select a dealer.
Usually, bout 6 months after testing a few cars I have narrowed in my search, I zero in on the one I want that I can afford. I already know the features by heart. The car has been demoed to me several times, as well as all the info I already knew by reading articles on the net etc etc.
By the time I want to buy, it makes little difference to me what games they want to play, if any. I go in, and I talk to the salesman. I then quite simply make my offer. I say, "I'll offer $$$$ for that car, and no more."
The guy I had wanted more information, and stumbled over his words (he was new). I told him, "Lets see what your boss says first."
Clearly they were ruffled, because they put an experiences salesman on me right after that to help the new guy through it. I didn't budge, I didn't do anything special. I simply gave them my offer, heard their counter offer, and negotiated my trade. I stood my ground, I knew what my car was worth, and I was confident and to the point. There really weren't any tricks.
People that insist that they trick you are simply not very good at bargaining for the lowest price. I got my car for less than 1% over invoice. They simply wouldn't give me any more. I ended up paying less than 20,000 after trade for a very nice car. And there were no games, the 4 square thing didnt throw me, nor intimidate me. Heck, I didn't even really care.
The truth of the matter is. Know your product, know yoru trade, and just look at the numbers. Who cares what kind of format they use. You've gotta realize, that they aren't going to sell you the car for less than invoice unless its costing them money to keep it. (i.e. you buy an 05 in 07). And if you lived on commission only, you'd use every trick in the book. Sadly, it means you've gotta be simply cold and to the business. And unemotional.
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IAN 8:53PM (4/02/2007)
I love the terms "rip off" and "scam" thrown around so freely. As someone else mentioned the 4 square is simply a way to figure out what direction the consumer is headed in paying for his or her purchase. Why would a dealer or salesperson spend all the time negotiating in good faith for an hour just to find out the customer wants a $200.00 payment on a $20,000 automobile. As for the trade in process, sure do some due diligence in that regards, but remember the computer doent buy trade ins. And selling a car on ebay certainly is not the best answer. You probably end up dealing with a teenager who has no ability to buy a car in the first place. And lets be real..consumers are to blame equally as well. The easiest thing for a consumer to do is say to dealer Y that dealer X told them a number on a trade or price that has no foundation in reality. Are there dealers that dont play fair? Of course. But the reality is that the large majority of dealers and salepeople are hard working honest people. The dealers and owners employ many people in their communities,support local organizations,charities as do a majority of the employees. So before we go off the deep end and before we take for granted what a disgruntled ex car person says why dont we learn a little more about what you speak of.
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berne1 8:59PM (4/02/2007)
The four square CAN be used as a tool, unfortunately is used a lot as a rip-off.
The thing missing is APR if you're financing and things like 'credit life', etc. Those can be packed into the payment while showing the vehicle price at what you agreed upon.
Be sure to check over your paperwork IN THE FINANCE OFFICE! That is where you may discover that extra couple hundred bucks for 'Credit Life', Paint Protection packages, a 10.9% APR, etc. Or, my personal favorite, Dealer Advertising. If this advertising charge isn't on the invoice in the form of some kind of Dealer Group charge from the manufacturer--DO NOT pay it! The dealer charging you to advertise to you? That's a normal cost of doing business in my book--sorry.
I used to train dealers in sales & leasing programs. Like the author said, they do this every day. You don't. Do all the research you can...and don't get caught up in the excitement of the moment. Some dealers rely on people investing so much time in the process that they just concede a few hundred bucks. Don't do it. Leave. They'll call you back.
There are dealers who sell vehicles at a loss (on paper) by giving you a selling price well under invoice. They rely on strong F&I Managers to bump interest rates a couple points, gloss over credit life and advertising charges, etc. If a customer questions it, they can either explain it and move on, or take it off if the customer insists.
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Mark MacLeod 9:04PM (4/02/2007)
The first time I saw a four-square was when I was shopping for a car in 2001. I wasn't falling for any of that crap. How could they not even show the PRICE OF THE VEHICLE?!? The monthly payment means nothing without knowing all the other factors.
After being verbally assaulted by the "red jacket closer", I ended up walking out. I haven't been to that dealership since and have waved off everyone I've spoken to about them.
http://www.markmacleod.com
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Brett 9:05PM (4/02/2007)
OLD INFO.
There are hardly any car dealers left that use "four squares". With the increase of computer use in the auto business most have or are upgrading to software that replaces "four squares" to show customers the numbers. The salesman will still ask the necessary information to create a deal printout, but they don't play games with payments like four squares.
My advice: Go to a dealership that is "modern".
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G Money 9:06PM (4/02/2007)
I sold cars briefly for 6 months after college till i got an engineering gig. The 4 square really isnt a gimmick. Too put it simply, Buying a car is a math problem. I'll admit that one should always have financing set up prior to going in and just work on the price of the car but its not really a sleight of hand. What does it matter where they get the figures from as long as the final payment is something you are comfortable with.
I went with my pops to buy a ford truck 2 weeks ago and the guy didnt even pull out a 4 square. We just worked on price.
Here's my tips to buy a car;
To find the value of your trade in, go to kbb.com and click wholesale value, "GOOD" condition, and enter the options mialage etc. Theres no such thing as a used car in EXCELLENT condition. Only time a car is excellent is when its new off the showroom floor. Whatever that trade in value is is what you should aim to get a dealership. If you want more, sell it privately. No dealership is going to take a trade in more than it will fetch at auction, becuase if they cant sell it on the lot, thats where its going, to auction.
Go to edmunds.com and find out the invoice price of the car MINUS any applicable rebates, and ADD $200. That should be your purchase price. So if a car invoices for 20,000 and has a 1500 rebate, you should pay $18700, (20000-1500+200=18700). 200 is fair profit for a dealership. Be advised, that if a car is indemand, or just came out this wont work. You have to pay what they are asking, or wait till demand dies down.
Go to your bank, credit union, home equity loan and get preapproved for that amount plus a little more for applicable fees. This way you dont have to deal with dealer financing. Now when you go to see the finance guy you tell him your preapproved at a certain rate, if they can beat the rate you got, great you did well. If not, no sleight of hand here.
As for fees, Dont pay for window etch, dont buy an extended warranty. The only fees you should be paying are, DMV, and a SMALL DOC FEE. If the dealer fees are more than 300 TOTAL, not including DMV, then you should walk. Those dealer fees are PURE PROFIT.
Thats pretty much it. Good luck to all.
heres a great clip of a car deal going down
from a great car selling movie
http://www.youtube.com/watch?v=5ROqyleNmGY
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SherbornSean 9:59PM (4/02/2007)
#3, I disagree. The best tools a consumer has are inside their socks. If you don't like the way you are being treated, just walk out the door.
There are a dozen more car dealers with a hundred more sales reps. Eventually, you'll find an honest one who will treat you with respect.
Also, feel free to walk out the door and over Julia Collyns' head.
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Driver X 10:02PM (4/02/2007)
The four sqaure is a sales tool. Not a ripoff or scam. Do you know how many ignorant people go into a dealership to buy a $50,000 vehicle with no money down or equity in their trade and want a $250 to $300 a month payment. Plus most of these fools can't qualify to rent to own a TV. The four square makes you a buyer or a liar real fast. Come on people, learn basic math and we can treat you like adults.
How come you guys don't write about the scams of the modern day journalist? I have been the automobile business for almost 30 years and 95% of the people I have ever worked with were very honest and had high moral character. Just like any other profession. I think Autoblog and AOL use scams and tricks of the car salesman to fill space. Creative Writing 101 comes in handy for the expose on the Con-Artist Car Salesman. Where do you get this stuff? I think you make up most of it. The image you portray us with is wrong. Do you know how many widows, single parents, young buyers and elderly people I have helped? Numerous times, I could have taken advantage of them but I chose to help them at my own expense. I'm not saying I lost money. I know lots of salespeople that have done the same thing. You would not dare do a story about us. It might improve our image. The sign screen for AOL has story about the lying cheating car saleman in the headlines every week. Maybe, they should hire some real journalist. Remember, we get up and go to work everyday to support a family. Just like everyone else.
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NMT 10:10PM (4/02/2007)
Ugh, I hate car salespeople. Every automaker should just switch to the Saturn/Scion no pressure, no haggle pricing. I'd recommend buyers just test drive cars to figure out what you want, then walk right out of the dealer, go to edmunds.com, get the true market value price there, and just fax that offer into all dealers internet sales dept within a wide area of where you live, and buy it from whichever one accepts first.
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NMT 10:14PM (4/02/2007)
That last salespersons comment says it all:
"Come on people, learn basic math and we can treat you like adults."
Thats the problem, there are a lot of ignorant people out there who walk into dealerships trying to buy cars they could never afford.
The problem is too many salespeople treat ALL buyers like idiots. What do I have to do, show up to the dealership with my resume and engineering degree in hand to get treated like an intelligent adult?
I have had several frustrating experiences with car salespersons that have left a bad taste in my mouth. I have yet to buy from one.
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jg 10:16PM (4/02/2007)
' Come on people, learn basic math and we can treat you like adults.'
Until then......profit.
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Richc222 10:23PM (4/02/2007)
I took a 'job' selling cars for the sole purpose of learning. The four way is a tool.Most people did NOT have a clue as to the value of their trade-in,APR,or even HOW LONG THE~LOAN WAS FOR! The goal was to SHOCK the ignorant sheep into focusing on the LAST square.HOW MUCH CAN YOU PAY per month plus$100-200. more.
I also got to see what freaked management out.I told the mgr I had a guy who wanted to write a check.He was giving the mgr one shot to tell him what he would sell the vehicle for.The mgr was at a loss. He said he did not know what to do,he didn't want to be too high,or to low.It was a good education,all the above posts on research,taking your time will pay off.Keep in mind,the more time a salesman invests in you, the more apt he is willing to take a 'mini' (Minimum commission,usually $100.00)than to 'waste' that time.
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Truckchamp 10:27PM (4/02/2007)
Well I'll just start off by saying I am a car salesman. I'm in this business to make money, just like everyone else goes to work. The funny thing about buying cars is that it is the only business that all of our inventory cost is posted some where. If you really wanna know who rips you off, look at McDonald's. You buy a 99 cents double cheeseburger, and it only cost's them 11 cents. Now i do realize we are talking about a different money scale, but they're mark up is way higher percentage than ours. The idea of a salesperson is to have someone who will show you a car, and hopefully show you the value of buying this car. Also he is your go to guy for any problems, concerns, and hopefully future purposes. I do realize there are a lot of crooks out there, but realize there are more good guys than bad. I have a family to support just like everyone else. And by the way, no one uses four-squares anymore, and we have to show you what rate we are using, it's the law now.
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geo.stewart 10:28PM (4/02/2007)
The 4-square is a shell game. How do I know? If it was a tool, it would be the 5-square sheet. What's missing? the number of months you are making that payment.
I'm sorry, but you are not, I repeat, not paying 500 under invoice for that car. You are paying your trade in, your down payment and $xxx per month x ## of months. Yes, you can get a 200 monthly payment, for 84 months which means you are going to pay a bit more in interest.
Your best tools:
sell your car yourself. painful but you will get more. know this though, your trade-in value, you dont pay taxes on.
have financing in your hip pocket but be aware of 0% financing or know if 0% is better than the rebate and your own financing.
know what rebates are out there. not just consumer rebates but rebates to the dealer. Automotive News publishes these weekly. Its an expensive subscription but worth it when you are buying American, and increasingly imports.
And remember, geez, the dealers are trying to make money too. You dont have to get ripped off but they do want to stay in business.
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Brandon 10:49PM (4/02/2007)
Well, this makes my guest blog elsewhere largely irrelevant, though it didn't directly target some of the issues here.
Oh well, such is life.
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