Understanding the 4 Square Method of Car Dealer Negotiation

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Article QuickTakes:

• How the 4 square method works
• Use online negotiation to take more time to think
• Reduce negotiation variables with outside financing
• Keep the out-the-door price in mind

During car sales negotiations, you might feel that you don't know what a good deal or a bad deal really looks like, or whether this is the right car for you. Fortunately, there are a few well-known techniques that car dealerships use when working to negotiate with you, including the 4 square method of negotiation.

Car dealership representatives work to make a profit (like any company), but they also want to understand what really matters to a customer so they can help you get what you want most. When you understand their strategy, you can approach your car purchase with the confidence of knowing what you're agreeing to pay at every step of the process.

Car Sales Negotiation: How the 4 Square Method Works

Sales works with a few psychological principles: especially the principle of understanding a person's expectations to help a sales representative manage them and find common ground. For instance, some car buyers come in believing that their trade-in car is going to really help them lower their new car's price while others know they need a low monthly payment—even if it means they must pay for longer or pay more overall.

To learn more about what matters to you, car sales representatives may use a worksheet or document known as the 4 square method. This document typically includes four sections:

• One that points to the value of your trade-in
• One that is the price of the car
• One for down payment
• One for monthly price

In the course of a negotiation, the sales representative may talk to a manager or other person and bring you different versions of these four numbers as you negotiate. If they notice that you find one number unacceptable, they may work to bring that number down, even if you don't notice that the other numbers go up or are unaltered. For example, they might bring your monthly payment down but never change the overall sticker price, making your loan a longer-term one.

When you expect a car salesperson to focus on one or two of the numbers — even if you really need to evaluate all four — you can better prepare to get the entire financing package you want.

Boost Your Leverage in a Car Negotiation

Car salespeople negotiate for a living. Getting more leverage to negotiate as a buyer in the 4 square method conversation involves simplifying the factors for yourself, and removing some of the pressure by thinking through your decisions away from the dealership. Consider these options as you shop for a car.

Avoid the 4 Squares With Online Negotiation

Many people who experience anxiety in an in-person car sales negotiation can benefit from doing their research and negotiation online. If you can get a car salesperson to commit to certain terms in writing and give you a full account of what you'll pay over email, you can bring that document to the dealership. If they say that car has already sold and you need to restart the negotiation process for a different car, you can still decide to negotiate over the internet if you know that will help you take everything into account.

Arrange Outside Financing to Focus Your Efforts on Price

A big part of the 4 square method involves moving numbers around concerning the sticker price, the monthly payment, and the terms of the loan. However, you can simplify the discussion by getting outside financing from a bank or credit union. When you come to a dealership with financing arranged, you'll simply be looking at the down payment, trade-in, and sticker price, as well as any fees involved. Having fewer items to negotiate can help you keep track of it all and walk away satisfied.

Keep the "Out-the-Door" Price in View During a 4 Square Car Sales Negotiation

There are times when you may find yourself experiencing the 4 square method during your car buying experience. However, even if you feel pressured to officially buy the car because of the agreed-to terms, you are always free to say that you'll want to evaluate the out-the-door costs of the car before making your final decision. This means that you want to know everything involved, including loan terms, fees, and any other add-ons.

Negotiations with the 4 square method may leave a few factors out, so be sure to mention the elements you want to know before you move forward. Car dealerships will still offer you deals that benefit them — since they need to pay their workers and maintain their businesses — but you can make sure that no part of the final costs are a surprise to you, putting you in a great position for negotiation success.