The Infamous 4-Square
The infamous "4-square work sheet is one of the salesperson's greatest weapons for getting you to pay the highest possible price for a new car. If the test drive makes you lust and salivate for a new car, the 4-square will insure you pay top dollar. Unless trained in ways to defeat the 4-square, most buyers will be like sheep led to the slaughter. You simply can't beat it. The center of negotiations as well as the final price you pay for the car, the financing terms and the trade in value for your car are all determined on this simple sheet of paper.
At the top of the worksheet the salesperson will write down the basic information, like your name, address, telephone number, the make and model of the car, and the serial number. This is simply information, its non negotiable.
The rest of the worksheet is divided into four sections. Each of these sections is an area where the salesperson will work on your weaknesses. Each of these areas you can think of as a battleground or a beach front assault where you fight for every inch of territory. And believe me, you will fight tooth and nail. This is what the sales process is all about. It's not about finding you a car that's easy. It's about maximizing the profit on the sale, which translates into huge commissions
The first thing the salesperson does is write in big, clear, bold, numbers the sticker price of the car. This is a phychological act designed to mentally defeat your negotiation efforts. There is is in clear view, written in INK, bold and nasty, the sticker price of the car. Immediately, you should know you are in for a fight. Let me tell you why. Because no one in their right mind pays STICKER! I told you, never negotiate from the sticker price down. Always negotiate from the invoice up. When you see the sticker price on the worksheet in bold ink numbers, it gives the message that this is what you have to pay if you want the car. It's not like the numbers can be erased. It also tells you that the salesperson is in control. He's in charge. He's the authority figure. it also tells you that he's the screwer and you are the screwee. After all, he's the one writing down the numbers.
Another point ot keep in mind that the sticker price is not the total price you will pay for the car. There are other fees like, license fees and sales tax! They will usually add this in later. It gives you the impression that you are paying less for the car.
After the salesperson fills in the sticker price, he will start with the other three boxes on the 4-square. They include the trade-in value of your car, your downpayment, and the monthly payment. Each of these areas (with the possible exception of the downpayment) is an area of negotiation, and an area where you can get taken for the ride of your life.
One of the first questions the salesperson will ask is how much to pay as a monthly payment. This is a loaded question. It really does not matter how much you want to spend per month. The real questions are what are you going to pay for the car, what will you get for your trade-in, and what are the financing terms. At this point, he amount of the monthly payment is irrelavant to getting a good deal. The salesperson is only setting you up to be taken advantage of.
It does'nt take a genious to manipulate monthly payments. You can spend less per month on a $25,000 car than you would for a $20,000. One way to do is to strech the payments out over 5 years of more. Some unfortunate individuals have been duped into 8 and 9 year car payments. This is so insane as to constitue potential consumer legal action. To learn more about financing click here.
Another trick is to try to get you to spend more per month than you really want to. If you tell the salesperson you want to spend $350 a month, he will counter with a question. He will ask, $350 a month and up to.. ? At this point most buyer will add an extra $50 or $100 dollars if they think it will get the car. That extra amount may not sound like a lot of money, but it can add up to an amazing amount. In many instances it just goes into pure profit on the deal. An extra $50 a month can translate into $1,800 on a three year loan. A $100 a month can translate into $9,600 over the course of an 8 year loan. It doesn't take a genius to see how many ways you can get screwed by paying a little extra each month.
The point is, when you tell the salesperson how much you are willing to pay per month, you lose. Always negotiate for the price of the vehicle as well as the trade-in allowance, and financing terms. Ideally you should walk into the dealer with financing all ready in place and your car pre-sold. If a salesperson asks you how much you want to spend per month. Tell him, "I don't want to spend anything." But also tell him, you are not interested in the monthly payments, you are interested in the terms of the whole deal, which includes the price you pay for the car, the trade-in amount you receive, and the financing terms.
The salesperson will ask you how much you are willing to put down on the vehicle. This is obviously less significant to the negotiation process than the other areas. Down payment however, could impact the financing of the vehicle. Hopefully you have a large downpayment and financing prearranged.
The last box to fill in is the trade-in. This is a batttle over how much do you want for your car versus what the dealer will give you. In most vehicle sales involving a trade-in, chances are the dealer will make more from the trade-in than he does from the sale of the new car. The profit potential for the dealer is extrardinary. What does it matter if you purchase a new car below invoice, if you loose thousands on the trade-in? You are always better off selling the car yourself. If you are forced to sell the car to the dealer, get a fair price. If they don't offer the price you need keep negotiating.
Every new car buyer gets excited about the new car. At the same time they want to dump their used vehicle on someone. They veiw their used car as moving trouble, or a money pit. The truth is, it's just the opposite. Your used vehicle is the most cost-effective car you can own. On a new car you will lose upto 20% of the vehicle price the minute you drive off the dealers lot. If you are buying a $25,000 vehicle that's a five thousand dollar loss in a matter of minutes. Five thousand dollars can buy an awful lot of repairs! By the end of the first year your new car will have cost you a total of $7,500 in depreciation alone. You will also pay more in insurance, finance charges etc. by the end of the 2nd year the depreciation cost will total about $10,000! That's alot of repairs! New cars are expensive. Buying them keeps you in bondage. Your used car no matter how much work it needs, is still the most economical car you can drive. Your trade-in is valuable. Clean it up, fix the minor little problems, and if you don't decide to keep it, sell it for a good price.
Don't let the dealer steal your trade-in. The first several offers will never be their best. Hang in there. Even if they tell you they can't go higher, don't believe it. Keep trying to get a good price.
Remeber the first numbers the salesperson writes down are only setting the stage for the battleground. Everything is negotiable from that point. Also keep in mind that the salesperson always uses numbers that are to his advantage. The first numbers are always a bad deal (unless your use the internet or the IFI Discount Buying Club).
What becomes confusing from the buyer's perspective is that the salesperson will not negotiate on one box at a time. The process is dynamic and a change in one square will cause the salesperson to adjust another square. Remember, he is trying to maximize the dealer's profit and his commission. The salesperson takes the negotiation process very serious and will spend countless hours trying to get you to buy the car. They will not give in without a fight.
If you try to get the lowest price on the new vehicle, they will try to offer you less for the trade-in. If you get full value for the trade-in they will not give you the lowest price on the car. If you did get the lowest price on the car and the full value on the trade-in they try to make it up on the financing. The battle goes on as the salesperson trys to make a serious profit somewhere.
The majority of people are not prepared for this process. Most do not understand the numbers to begin with. When the numbers all change every few minutes it can become mindboggling.
Keep in mind that the first numbers offered by the salesperson are extemely biased in favor of the dealership (unless your use the internet or the IFI Discount Buying Club). They will keep hammering you will figures that are in their favor until you break down and give up. That is why salespeople make big dollars in excess of 6 figures and dealer makes millions in profit every year. They negotiate and wheel and deal everyday of the week. They are professionally trained over and over in the art of salesmanship as well as negotiation. They will work you until you break.
Even when the salesperson concedes and gives you a better deal, he will do so in such small increments, you will feel like your'e in a snail race. Offering small dollar concessions is a way to make you feel they are giving you the best deal possible as well as wear down your resistance. The will also tell you they are giving you a great deal or their best price. It just is'nt true. The best price comes slowly after hours of difficult negotiation -- if you stick to your guns and don't make a critical mistake.
After negotiating the worksheet will be covered with so many number, you will be lost in confusion. That is why I recommend you take your own notebook and take notes. Keep the numbers neat and always ask the salesperson twice what the figure is. It helps to bring a friend to the negotiation process to give you support and to keep you from giving in. A freind should stay unattached emotionally. You can play "good cop - bad cop" if your freind is versed in negotiations. Let your freind be the deal killer while you remain the salesperson freind. If done right it can confound the salesperson.
The salesperson is playing his own form of "good cop - bad cop." Whenever he has to check with his manager to see if he will ok the numbers, in the majority of cases its just a game. This makes the salesperson the hero trying to get a good deal for you by confronting the stingy salesmanager. Don't be fooled. It's just a game and the salesperson is playing you for a chump. The manager will only be actively involved if you truly negotiate a super deal.
The numbers will come into line slowly. Dealerships are not in the business of giving cars away and they feel that anyone who negotiates a good deal is stealing from them. It becomes a game of tactics in which the dealer starts grinding you down. From the first call to the manager to determine if the car is still available (of course it is) to the fake numbers they write on the 4-square, it's all rehearsed and preplanned. This is a game. Sit back and play it. Just play it to Win!
A Twelve Round Prize Fight
When the salesperson fills in the 4-square they will use ridiculous numbers. They want you to pay sticker price, take peanuts for your trade-in, and pay the highest interest rate on your financing. When they give you the numbers, they will always tell you are getting a terrific deal. That' insanity. There strategy is to hit you with the worse possible deal and then see what you will accept. Believe it or not most people for this. They will only ask for a better deal once or twice during the negotiation process. The dealer will then concede a few dollars and tell them that's the best they can do. The customer believes it and buys the car - that's how they get taken.
Instead of accepting the first few offers, hold out for the deal you want. The salesman will pick up the phone of walk to the "sales manager" and come back with a lower offer every time. Unfortunately they dealer will only concede a few hundred at a time. It's all a game. Most of the time the salesperson never talks to the sales manger. He only pretends to. This way he looks like the hero, trying to battle the sales manger for a better price. It's not true. The salesperson is not the good guy. He is the villain. He is looking out for his own good not yours. The salesperson can reduce the price on his own accord until he gets to a certain point. He doesn't need the manager until he reaches a really marginal deal. Then they call in the "closer or the "salesmanager" and the negotiaiton process begins again.
If the salesperson does'nt reduce the price or offer you what you want, it may be time to walk away. There are times when I have negotiated a car deal where it took several days of negotiation. Have patience and hold out for a good deal. Eventually you will get the dealer to come around to your terms if they are fair.
Always remember:
• The first few deals they offer you are not in your best interest. You have to hold out.
• Most of the talks with the salesmanager are fake.
• Most of the numbers they give you in the beginning are fake. In fact, they are trained to offer you uneven numbers like $1,987.45 for your trade-in versus $1,900. The reason they do this is that round numbers look fake.
• You are being manipulated into overpaying. That's how they salesperson makes a living and the dealer makes obnoxious profits.
• You can't afford to pay an extra thousand for your car and lose a thousand or two on your trade in. That's why we encourage you to follow the advice on our website and to attend one of our seminars.
No one said it would be easy to get the best deal. That's why we instituted the IFI Discount Buying Club and our On-line buying services. If you really have the heart of a lion and are willing to play the game, you can beat the devil and get a great price. Unfortunetly, it may not be that much better than an instant price we can get you as a member. More and more we are getting better deals for our members. Start with the member price and if you feel you can beat it negotiate from there. We are here to help you. Our affiliation with any dealer comes second to the interests of our members. We want you to win! That's why we offer you advice and our support.
In the Financial Wisdom Seminar we teach you how to save money on all your purchases. Let us help you get wise.
Remember, my job is to help you become financially stable, secure and independent. I will do my best , you do your best.
Your author and friend,
Paul Barrett
