Dealerships Rip You Off With The "Four-Square," Here's How To Beat It
Former used car salesman Alan Slone grows a conscience and reveals one of the major strategies dealership use to screw you when buying a new car.
At the heart of it all is the "4-square," a sheet of paper (sample above) divided into four boxes: your trade value, the purchase price, down payment, and monthly payment. This is supposed to help you and the dealership come to an agreement, but as you'll see, it's really more akin to three-card monte dealer's deck of cards. Many, but not all, dealerships use this tool.
Here's 5 tips to get you started, and then a very detailed breakdown of how the dealership manipulates buyers with the four-square.
1) GET YOUR FINANCING THROUGH THE CREDIT UNION BEFORE YOU EVEN STEP ON THE LOT.Once a car salesman knows you don't need financing, they're more willing to be forward with you and knows they don't have to work on the payments with you, because it won't help. We'll still try to beat whatever APR you're getting at the bank and offer you payment deals, but forget them. You've got it worked out, and only need to know the price - bringing us to the next point.
2) DON'T HAGGLE OVER ANYTHING BUT THE PRICE.
This seems obvious to most of the readers of The Consumerist, but most people miss this - especially if they're getting dealer financing.
3) DO YOUR HOMEWORK.
Know what the MSRP of the car is, know what your trade is worth. (Here's a hint: take the NADA and subtract about $2K - used cars are appraised by books that aren't published to the public, so it's not blue book or NADA value. It's called "black book" value; "black books" are published weekly by companies such as Manhiem Auto Auctions (http://www.manheim.com/), and these show the going price at the auction, that week, for your car. Basically, wholesale cost.)
4) LET THEM KNOW THAT YOU KNOW WHAT THEY ARE DOING.
If you read this article, you are already ahead of 99.9% of the people walking in. They'll cut most of the bullshit with you if they know that you're not going to fall for it.
5) UNDERSTAND THAT YOU ARE NOT GOING TO PAY COST FOR THE CAR, AND THE AMOUNT YOU PAY OVER COST WILL BE MORE THAN YOU THINK.
6) HERE'S HOW THE FOUR-SQUARE WORKS:
The "worksheet" (or four-square, as it's called) is the first thing a person will see when they sit down to negotiate a car's price. This sheet is used both in used and new car sales. When the interested party sits down, they've already driven the car, and have talked to the salesman about what they're looking for. The salesman has had the trade evaluated, if there is one, and has gotten the customers something to drink to take the edge off.
After sitting everyone down, the salesperson starts filing out the four-square. A blank one looks something like this:
The salesman will only put down the make, model, VIN and customers information (not pictured). Then, the salesman will have the customer initial the part that says "I will buy today if numbers are agreeable to both parties." If there's any resistance (which normally there isn't), the salesman simply says that its to make sure that the customer really is ready to drive the car off the lot today - IF they can get the numbers right. I never had anyone not sign the form who was actually willing to buy the car today. By doing this, you have shown your commitment to the manager in the tower (tower: back room, usually behind glass, where the salesman goes to confer with his manager.)(A note about the tower: This is where the deal actually takes place. The salesman you are dealing with is NOT who you are negotiating with - the sales manager, who sits behind a desk (and is usually one of the scummiest people you'll ever meet) is who's actually going to be haggling with you. This will not happen in front of you, nor will you see what is actually happening. It's a bit of theatre, this part.)
The salesman will then take the paper up to the tower, and when he returns, you'll see something like this:
The salesman will start, very matter-of-fact, going over the numbers with you. First, he'll start with the value of your trade.The value of your trade, as listed, is $3000. You, expecting at least 5k for your beater, are unhappy with the number. That's fine, the salesman says. We'll get to that in a moment. He then goes on, very quickly, to just state the price of the car. Salespeople are instructed to move over these parts of the sheet VERY QUICKLY, as you'll see in a moment.
Next, he arrives at the down payment square, which is easily double what you'd hoped to put down today on the nice new Prius you now want very badly. Lastly, he arrives at the monthly payment. "That payment is outrageous! I can't afford that!" is what you're probably thinking. All in all, these are pretty crap numbers from what you see.
THESE NUMBERS ARE MEANT TO INSULT YOU AND PUT YOU ON THE DEFENSIVE, ESPECIALLY THE LAST TWO. The idea here is that, unless you're really observant, to get you less concerned about the overall price of the car and what your trade is worth (we'll go into trade manipulation in a moment), and get you to the payment plans offered at the bottom. The salesman, who knows you are steamed, will keep on acting like nothing is wrong, and hand you a pen to sign by the X. This is done for two reasons - 1)You might be the biggest, dumbest sucker we've had today and actually agree to these terms (happened twice the three months I did this), or 2) You look like the aggressor when you say you won't sign.
When you decide state that those numbers don't work for you, the salesman will ask which numbers you have a problem with. Most people will go straight to the down payment, as that's usually the part that most people gag on, followed closely by the trade in value. The salesman will then either talk about your trade (and proceed to downplay the car as much as they can - that's usually pretty easy), or will go directly to the down payment. Very discreetly, the salesman will fold the four square so that the only figures you see when you're talking are the down payment and monthly payment.
The salesman will then say "Well, what were you thinking about putting down today on the car?" You'll respond something like 1500, 1000 or even less if you're in a bind and NEED the car but are broke. The salesman will nod, and act as if he's empathetic with your plight - those bastards up in the tower *are* asking too much from you! He'll then cross out the down payment number and write in the number you're looking for.
At this point, the salesman will say something to the effect of, "Well, we may be able to get that down payment done for you. But, as I'm sure you know, the less you put down today, the more you'll have to pay off on the car - so this payment is likely to go up. What were you looking to pay on the car for payments?" You respond, "I didn't plan on paying that much, must less more!" The salesman will pause, hoping that his last line will sink in a bit and you'll either acquiesce to the current number or offer something higher.
If you don't, and insist that you were only planning on paying $300 a month for the car, the salesman will say, "I don't think I can do this, I really don't. But, I tell you what; my manager is crazy today and hasn't sold that many cars - he's really under the gun from upper management to get some cars out today, and he might just do this. Tell you what - if I can get these numbers, would you buy the car right now?" You say, "Well, sure, I guess." The salesman will say, "Okay, can you write me a check for the down payment so I can take it up there? They're not usually willing to turn down someone if I show up with cash in hand!" (Real reason? People are really unwilling, for some reason, to ask for a check back later if negotiations start to break down.)
Most people, at this point, will write the check - if the salesman is good enough with the snow job, people will honestly think that they're getting a good deal and that they need to do everything they can to get the manager to cave and sell them the car for next to nothing. The salesman will also get you to sign the form, by the X, saying that you're agreeing to the new numbers, not the old. He'll then put on his "wish me luck" face, and trudge up to the tower to haggle with his boss, the mean ol' manager.
(A note about the X: There's nothing legally binding here, BTW. You could sign your SSN, your blood type, and your name all on that line - but there's nothing binding on either party to make that happen. It's a precursor to the real deal with all the lovely paperwork in finance...but not the actual deal. However, the dealerships make you do this so you'll think its official and leverage yourself into thinking you may have just bought a car.)
The salesman will return, with a huge grin on his face, and something like this:
He'll say, "Wow! He really is in a tough spot! He was willing to let this go for the down payment you wanted! But, like I was saying, he couldn't really hit the payment you were looking for because he went down so far on the down payment, and he can let it go for this. (Motions towards new payment offer.) Would this work for you?" You will sit and look at the number, and wish you weren't buying a car today but instead on vacation. You will either agree, and we'll enter the final turn, or you'll go another couple of rounds with them until they either meet you somewhere in the middle, or you start to walk out.(Note about "walking out." This doesn't work if your offer is, truly, unrealistic. You need to do your homework before going in - this includes finding out how long the car has been on the lot [just driving by and seeing it for a couple of weeks is good ammo], what the going rate is for those cars, and above all else, securing your financing before you get there, so you're more worried about the ACTUAL PRICE OF THE CAR instead of these bullshit terms.)
Now, lets say you've got a problem with the trade price, as well as the other figures (other than price.) The salesman (and manager) will probably agree to whatever price you want for your trade, within reason. So, assume the sticking point is that you want $5,000 for your trade - that's fine, we'll just say it's going to be bought for $5000. We simply move around the price of the car to $2,000 more, and you're in the clear. You don't notice, we don't say anything, and you feel happy. This is the way that dealerships do the whole "push pull or drag" sales where they'll give you $5,000 for an engine block.
So, at this point, we'll assume that you've gotten everything square and you're ready to close the deal. Sometimes, if the manager feels especially nasty (or has gone a few rounds with you via the worksheet), they'll come out of the tower and say "Folks, I'm (Douchey McDouchebag), the sales manager here. Congratulations! You've just bought a car! We were able to get the payments to $310 - I know you wanted $300, but that was the best we could do. That's close enough, right?" They'll nod their head (another psychological trick to get you to agree), and almost every time the person says "Yea, that's fine!" The problem is, they didn't realize that a $10 payment bump over a 5-year loan nets an extra $1k in profit for the dealership. It's called "the $10 (or $15, or $20) close", and I only saw it fail when a person was really, really exasperated with us. The deal ends, and you wake up in a year realizing that, somehow, you're $6,000 upside down on your car, while the dealership is laughing all the way to the bank.
So, those are the major pitfalls associated with the four-square; it looks really unassuming on its face, but its designed to make you pay more, and not realize what's going on. The manager, during negotiations, will write in BIG BIG letters, will turn over the sheet if he needs room, and will write over other things in order to make it as confusing and hard to deal with as possible in attempts to wear you down and make you sign.
The saying we used to have around the lot was "It's like the Dallas Cowboys playing a Pee-wee Football team." The average car salesman does this dance 4 times a day - you do it once every 3-5 years. They are better, and they will get you on some level. However, by doing stuff like this, you can control how much it happens.
Here's what a finished four-square might look like:
(Photo by Scott Jacobs, courtesy Edmunds)
What are your four-square horror stories? How did you "beat the box?" — BEN POPKEN
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Comments:
What if you're a member of the freakish minority of Americans who actually save money and would prefer to make the larger down payment? What leverage does that give you?
Great stuff.
Just bought a new accord in March of 06. What I did though was find in on Ebay at a listed starting price. Went to the dealer, they had it and I said I would buy it for the starting bid. They were happy and I was too. It was super easy and from what I can tell, being on an accord forum and working with a friend who bought his accord shortly after mine, I didnt overpay either.
I bought a car last September. They tried doing a variation of this (at a Mitsubishi dealership in Downers Grove, Illinois).
I got away from the 4-square by telling them that I would pay for the car mostly with Cash would only have a loan amount (Lie). I said I wasn't interested in anything but the bottom line price.. (Truth).
Now that gas is nearly 3 dollars in Chicagoland... I bike everywhere.
nice article...
I just this week started seriously considering buying a new car. It would be my first car buying experience, so it'll probably be few months before I actually pull the trigger.
I would love to see more of these car dealer insider articles!
-Get financed before
-Offer some value over the invoice (say 100)
-If there are any rebates (know beforehand) have them subtract that from the above price
-Make them show you the invoice (it may be less that what you saw online)
-understand that they actually pay less than the invoice price listed (the manufacturer holds back about 3%) and refunds that to the dealer after it is sold.
- after settling on a price; then talk about any trades you have. Make the car buying and the trade essentially two separate transactions.
@Pelagius: If you get financed before from a credit union/bank that is esentially like paying cash for the whole car to the dealer. This is the best position to be in when negotiating.
Good advice. I think that while not all deals may be done on a 4 square piece of paper like this, that's essentially the root of the deal though. I just bought a vehicle a month ago and tried to work around most of these the best I could (and tell me if I was wrong). 1). I had no trade in. I told them I had a vehicle but would sell it outright on my own. They kept asking me to bring it in anyway, but I refused. 2). I was preapproved for my own loan through a credit union. They kept trying to get me to finance with them (saying they deal with several agencies) and they would find me the best deal. I told them that unless they could beat 5% interest (used vehicle) that I wasn't interested. They dropped it at that point. 3) I told them I didn't have a monthly payment in mind. I wasn't interested in what my monthly would be, I was concerned about the price of the vehicle AS WELL as the total cost after tax, tags, etc. That was the price I negotiated on. 4) Down payment. I at first told them I was willing to put down $4,000 dollars but I wanted the vehicle for X dollars. Of course, I knew they wouldn't do that price. I haggled with them a bit and then told the salesman I needed to think about it and would get back to them (I left). I called them back said again, I wanted it for the same price I mentioned earlier but I was willing to give them another $1,000 down. They budged a little from what they were willing to sell it for, but not enough. Again, I walked out saying I'll think about it. At this point, I was ready to buy the vehicle but not without pulling out one more card. I went back the next day and told them I will drive the vehicle off the lot today but I needed them to come down to my original offer but I was willing to put $8,000 down. To be honest, I was willing to put $8,000 down right away, but they didn't need to know that. I figured it left me some bargaining power. They came down a bit more (not to my asking price but I knew that). Ultimately, the vehicle was listed at nearly $26,000 (plus tax, title, fees, etc) and I was able to get it for $22,600 after all fees, so I think I did ok as I priced the vehicle out at several places and all were wanting more plus tax, title, etc.
all this and much more is covered in an engaging read written by an undercover writer sent in by edmunds.com to be a car salesman for 6 months.
he explains the 4-square, where profit comes from, and the best time of the year / month to buy.
it's really a great read.
http://www.edmunds.com/advice/buying/articles/42962/articl...
FTA: 2) DON'T HAGGLE OVER ANYTHING BUT THE PRICE.
Can someone explain this?
Last car my wife and I bought we haggled everything.
1)Haggled price of car.
2)Haggled trade in (actually, they gave us better deal than what we expected but we were prepared to haggle)
3) Haggled financing. They offered an interest rate much higher than what we were willing to accept. They found us a better (fair) rate.
4) Haggled extras. We got some simple stuff upgraded (mats, cargo net, the dealer placard removed from the car). We approached this as a joke with the salesman but he went there with us. We actually told them that failure to remove the placard was a deal-breaker. :)
So had we not haggled everything, we would have had higher interest and no extras. I am confused.
I've purchased many cars and usually they pull out the 4-square. After getting suckered a few times we learned to get financing beforehand (never had to use it because the dealerships always managed to find a lower rate, they wanted the business more than our finance company) and focus intently on the asking price and base all other negotiations off that. Focus on the selling price! I used to try to "outsmart" the sales manager but always ended up losing, until I figured out to play dumb and keep insisting on the selling price. BUT watch out in the "finance office"--these guys are the real pros. Last time we bought, he sneaked a 10.9% interest rate into the contract when the agreement was for 4.9% (he then blamed the sales manager for the mistake even though the finance office prepared the contract), then he doubled the value (and tripled our cost) of an extended warranty, pure gravy for the dealership had we not noticed.
We complained to the dealership's CSR and received the warranty for free, a free set of tires (long story) and an abject apology. I think they were very concerened about what we'd write on the Customer Survey.
In buying 2 new cars recently, I can tell you that letting them do the negotiations is the wrong way from the start. I checked out Comsuner Reports, and my credit union has a site with great car buying advice.
I found out from Consumer Reports what is most likely the price the dealer paid for the car (with the caveat that they often get volume discounts, so they really get it even cheaper), and I figured out how much the accessories I wanted cost.
I then went to the dealership, and when I was ready to negotiate, I told them how much I wanted to pay for the car (I had a check from the credit union on me already), which was actually the price that Consumer Reports said the dealership paid for the car.
Each negotiation was successful. Meaning that I paid approx. $2500 less than the MSRP.
@jeblis: Another trick I once read about in Consumer Reports is to settle on a price for a car, then say, "Now, let's talk lease. Starting with this price."
They must really love that.
We have always used the "two transaction" method jeblis describes, and while it doesn't make the salesman happy, it usually works out for us.
Something that the article talks around but doesn't explicitly mention is that all of the negotiation over the down payment and the monthly payments didn't change the actual price (the top-right square) at all. That's the one that ultimately matters and which, with interest rates, will determine the size of your down payment and monthly payments. Ignore the bottom row until you've settled the issues in the top row.
@kenposan: The last two cars I've bought I told them that if they didn't remove the dealer name sticker and the license plate runner advertising the dealership I would walk (and i was serious about it).
In both cases, they removed both before I drove off the lot.
My feeling is: if they want their name on my car it's free advertising for them... they need to send me a check every month I keep their name on my car, or lower the price by $5k.
Another useful website for car buyers is:
It covers dealer's tricks, how to get decent loans, discover real invoice prices -- and everything else that has to do with buying a car -- in breathtakingly obsessive detail.
One other tip - if you don't have a trade and have your outside financing already buttoned up, e-mail multiple dealers in your area and solicit "all-inclusive, out-the-door" prices on the vehicle you want. Some will respond without giving you any pricing, others won't respond at all, but you should be able to get at least a couple to bite.
Then, play the responders against each other to get the price lower. Once you have a price that both sides agree is reasonable, schedule a time to go into the dealer to sign the paperwork and pick up the car. You can even request that they fax or e-mail all paperwork to you ahead of time so you can review without pressure and ensure all terms are what you have agreed to previously.
With my last vehicle purchase, using these methods, I was in and out of the dealer in just about one hour with minimal stress.
One other tactic that I have considered but never had to use - use the technique above to finalize your deal. BUT, also have a solid back-up offer from another dealer. Once you arrive at the first dealer, if they give you any BS, pull out the cell phone, use your speaker-phone option, and call the other dealer and tell them you have run into some issues at Dealer A and that you'll be in their showroom ready to buy in 10 minutes. This is even better if the showroom is crowded and you can talk really loudly. Watch the color drain from your salesman's face and chuckle modestly to yourself.
@kenposan: I think most salespeople assume they will be financing the car and will want you to haggle over the monthly payment. That way, they can adjust things behind the scenes (APR, duration, down payment) to make you get a lower payment. If you are getting dealer financing, every step in the negotiation process should include 1) the total price, 2) the APR of the loan and 3) the duration of the loan. The monthly payment can be mathematically calculated from those three pieces of info.
I got taken for a ride (har har) on my first car purchase (bad deal and the car turned out to be a lemon). For my second car, I negociated everything before going to the dealership. I got them to fax me the final paperwork all filled up. I was prepared to walk out if anything didn't match but there was no problem.
Negociating "from home" makes it easier to keep a cool head and walking in with a paper trail you agree with makes it easier to stand your ground. It takes longer and not all dealers will do it but I think it's worth the effort. With the papers, you can even shop around and ask other dealers to match each other's offers.
Don't hesitate to walk out if you get a "That fax was just an estimate". If you don't have a fax, email is good too but getting a faxed copy of the paperwork is the best.
You could also bring your own version of the four-square, with the info you already know (from doing all your homework before setting foot in the dealership, right?).
This would include:
- the True Market Value price (TMV) from edmunds.com for the exact car with options that you want
- your down payment amount
- the % financing you've already lined up with your credit union
- what the estimated monthly payment will be with these terms (use an online calculator to figure some ballparks)
When the salesman sits down with his four-square, just grab it, crumple it up and say "we won't be needing that", and whip out yours.
Say the following, word for word: "Let's do this the easy way. I am not an idiot. Say one word that insults my intelligence and I walk. Consider this your one warning."
Ask him to sign on the bottom of your four-square and then suggest that you both go visit the sales manager.
The way I go about it is to contact the internet sales people from the websites and play them off of one another. I've been told they work off of volume rather than just price. It was a lot less haggling that way and I got $300 over "invoice" on a Sienna last year. They also tend to manage the costco deals as well, which is another easy no haggle way to buy a car.
Another thing I do is go to carmax and get their no haggle offer on my trade in and make the dealer I'm really working with give me at least that price. (In NV, there is a sales tax credit if you do the trade in with the place you buy a car from.)
I didn't see the four squares when I bought my truck, but I did catch them trying another famous trick with the monthly payments.
Say you've decided beforehand that you can afford a mo. payment of $250. When the finance manager asks you what you'd like pay monthly, you flat tell him "$250". He then responds with an innocent sounding "Up to?" A common response is "Oh, I don't know, $300, I guess". BAM - you've just committed yourself (emotionally, and on paper soon) to a $300 payment.
I live in a small city with only one Toyota dealer. I drove to the nearest large city with five Toyota dealers. I handed each dealer a sheet that showed exactly the model, color, and option required. I listed the exact monthly payment for the exact number of months. I told them that I didn't care what the trade in value, selling price or interest rate. I said - "Give me these payment terms and tell me the total downpayment. The range varied by over $3,000 but I ended up with a great price. By the way, the finance person tried to increase the percent rate. I told her to lower one of the other numbers but stick with the three agreed numbers - down payment - monthly payment and number of months.
The comment in the article said that the salesman negotiate 4 deals a day and the average consumer, very rarely. My bank (USAA) evens the field by providing a negotiating service for new cars. It works great.
I go look at the car, pick what i want, and give USAA the VIN #. they call the dealership sales manager, say i want to buy if the price is right (and they know what the right price is) and then call me to confirm that yes, i want the car.
the best part is telling the salesman that you are here to just pick out the car, and that you have someone else to work out the dollars.
"Hey jerk, my people will work with your people for the price, you just show me the sapre tire again!"
I know that when the consumerist topic is insurance, there is usually a USAA lovefest. The bank is nice, too.
@Mark: My car didn't have the name sticker or pin striping (it was fresh off the truck). I told them that if they did any of that, the deal was off.
Oh and remember to make sure the floor mats are in the deal.
I've always gone in with financing done, knowing how much I had to spend and a note of the monthly payments per $1000. In the note book, I keep notes of whatever prices and other numbers they throw out. This way it's always with me and I can run the numbers in my head while they're playing around in the managers office.
I get the price of the car worked out, and then tell them if I have a trade. I keep it secret until we have the price settled. This way they can't change the price around, and I can negotiate separately.
Basically a three step thing.
1. Get the price of the car settled.
2. Get the trade in settled.
3. Sign and leave.
Keep notes so they can't try to trick you and have solid financing arranged. Tell them this first thing and that you will not be switching. That cleans up the process for me.
I purchased a new car a month ago and did it all via fax and email.
First I consulted Consumer Reports to get an estimate of what the dealer's cost was for the car. I also got pre-approved by my credit union and had a check in hand to present to the dealer. Then I waited until the next to last day of the month to contact dealers.
I emailed each dealer with a request for price letting the dealers know that I was also contacting several other dealers in the area for pricing. I also included the dealer cost estimate from Cunsumer Reports and let them know that I considered that the reference point comparing offers and not the MSRP or invoice price. After receiving each dealers offers, I emailed all the dealers again with the lowest offer I had received and presented a final chance to beat it.
I selected the best of these offers and had all the completed paperwork faxed to me. When I arrived at the dealer I test drove the selected vehicle to insure there were no issues with it and then completed the sale with no additional talk about pricing etc. The negotiated price was $50 above Consumer Report's estimate of the dealer cost. On top of that I received $2000 in rebates, so I ended up paying $1950 below CR's estimated dealer price, $4000 below Edmunds True Market Value, and $6000 below MSRP.
Yes, definitely negotiate the price of the car before talking about down payment, financing, or trade-in. Whether you already got financing from your bank or you're planning on financing through the dealer, you should walk in there and ask them what the cash price is for the car, also known as the "out-the-door" price.
If you are buying a new car, and can take a GM, look for loyalty bonuses. My wife and I just bought a Saturn, and because she owned one 5 years ago they gave us $1000. On top of this we got 0% from GMAC. I do not want to advocate for anyone brand, but that is a good deal (we got $1500 for a trade that was a junker, $1000 bonus, 0%, and a GM employee discount) that was only $800 over MSRP on a new car. Oh, and let them know you are already working with the Mazda dealer down the street, suddenly they give you free drinks, a gas card, and anything else while you are working with the dealer.
Last year, my wife and I bought our first car together. It was slightly used, but we found GREAT success with this method. I would find a car like we wanted at various dealerships using the internet. I would then email the dealership saying "Hey I'm interested in car X, and I'm willing to pay X dollars for it. Will you accept this offer?" 4 out of 6 dealerships tried to get me in or came back with a higher price, but 2 said, "yes, we agree." I responded that, pending a test-drive, we've got a deal. Went to the dealership, test drove, and sat down with the numbers, numbers were what we agreed upon, and I walked out with a car in 45 minutes (including the drive!). I'll never walk into a dealership again without the price already being set.
I already have my new car on order with the factory. I already have invoice+500 locked in (kickass salesdude who belongs to a car club I'm in). I will be financing through bank or credit union when it arrives this June.
I don't anticipate staying longer than the paperwork takes, plus optional "sit around and blab with cool friend" time.
Sat in on a finance sell once. It sucked. Not for me, ever.
No freaking way I'd sit down and go through this rigamarole.
If I were to buy a new car again (and I've bought my share), I'd do what's worked before:
a) decide what car I want, and with what options
b) canvass dealerships within a reasonable drive for the car (typically there will be a few)
c) dealing with the fleet sales or internet sales manager, ask what the best price for the car is AND GET THE OFFER IN WRITING (email has worked for this every time)
d) play the dealers against each other (e.g. dealer A says $20,000 and dealer B says $19,500. get dealer B to beat dealer A's number). You won't have to do this more than once
e) don't EVER finance at a dealer unless you get a loan rate subsidized by the mfg/mfg's finance company, and even then, run the numbers to see whether you're better off taking an additional discount.
f) don't buy anything else at that dealer. No extended warranty, no paint protector, no car alarm, NOTHING
h) enjoy your new car.
Edmunds.com had a very large article I read a year ago called Confessions of a Car Salesman. It goes into detail about new and used car sales techniques as well as the dreaded 4 square sheet. 3 out of the last 4 dealerships I've visited used the sheet. http://www.edmunds.com/advice/buying/articles/42962/articl...
@iMike:
add to point c) above: "check the number against an online invoice service e.g. Edmunds to ensure you are in the right ballpark. Make sure you net out any direct to consumer or dealer cash back. Cars.com has all these incentives spelled out by manufacturer. If you're not in the right ballpark, reply to your bidders with your expectation on price, and ask them to beat it. Itemize the expectation by showing the invoice number, cash back, dealer holdback, etc."
Great advice, thanks guys!
@kenposan: I assume the "don't negotiate anything but the final price" just means don't negotiate for a monthly payment (for example). It leaves too much wiggle room for them to overcharge you on the car, without it being visible. You could get a really low monthly rate, but extended over an obscene amount of time for example.
Some other tips:
- Don't buy the warranty at the same time. If you want a warranty (from the manufacturer) you can usually get them cheaper online after you already have the car.
(Or at the least, look up warranty prices online before you go, so you can identify a good deal!)
- I completely agree with others about knowing the invoice price (or as close as possible) before you go in. I worry when I hear people say, "I got it for $X less than MSRP!" - you should NOT be negotiating down from MSRP, but up from the invoice price.
- Another way to help separate out your trade-in price and your buy price is to get a quote from CarMax beforehand. In some cases, you're better off just selling the old car to CarMax (my friend was unable to get a dealership to match the CarMax price on his used truck).
Just be aware, in some states (if I understand right, and I'm definitely not a lawyer!) you can get a tax benefit by trading in the car at the dealership rather than selling it to CarMax (or anyone else) separately. In GA (again if I have this right) for example, you only pay tax on the cost of the vehicle MINUS the trade-in amount, but that only applies if you actually do the trade-in with the same party that you buy the new car from.
- Getting quotes from different dealerships is good... you can also check prices with various car-buying groups you might qualify for (Costco, maybe AAA or credit unions). Compare to online prices (someone mentioned Ebay already, CarsDirect works too).
Also - I found this recently. A non-profit that will call around and do your negotiating for you:
http://www.checkbook.org/auto/carbarg.cfm
(I've never used them, and they charge ~$200, but they are non-profit...) Could be helpful if you're not very good with the negotiating aspect of it all.
- Anyone have experience with getting "doc fees" dropped? I know they're BS fees, and in some states illegal apparently. Around here they can be upwards of $500 (!!!). I tried on my last car purchase to get them removed and couldn't :(
What I'd really love to see is an article on not getting ripped off with car maintenance and repairs. I seem to have tons of trouble in this area. I'm a single female, and not at all automotively-inclined. My last car went in for routing maintenance at a AAA certified repair shop... they recommended tons of stuff. I declined (I had been following the maintenance routine from the manufacturer). Car ended up dying on the interstate (ON THE INTERSTATE!!!) the next day while I was driving to work, and was never the same after :( Bleh.
Thanks :) This is my first post (hopefully ;) ) and I just gotta add - I'm loving the Consumerist. Found it a few weeks ago, and am really enjoying it, so thank you!
I'm pretty sure I ranted in the comments ~2 yrs ago about how to buy a car. It was right around the time MS was being coy about a LS7 disco chicken. Anyway. I shared my years of wisdom in the car business and every time I see a moronic article like the one above, I feel obligated to respond.
First of all, I'll assume that you have a reasonable level of competency and some spine. The author, AS, fails to give you this benefit of the doubt.
People seem to be scared when they walk into a dealership, as if they'll be hoodwinked or bamboozled into giving up WAY too much loot for a car they don't want. Don't be an idiot. If you have the money to buy a car, you probably have had enough success to convince me that you aren't a candidate for the short bus. So man up, grow a pair, and buy your next car the right way. Here's how...
1) Do your homework AT HOME. Figure out what you want ahead of time. If you're looking at several models, drive them but resist the temptation to discuss price until you are sure you want to buy. If you have to compare payments, get a payment on the car you like best, and then see whether the competitors can beat it by a sufficient amount to switch you.
Know what options are "must have" and what are "like to have." Know your first three color choices. If you are really picky on options and color, you don't have much leverage when it comes to negotiating, so remember that flexibility is your friend.
2) Go to the dealership. You can't fit a car through the little holes in the phone, and they keep getting stuck in my usb port. Settle on the car you want -- you shouldn't worry about whether or not you've been approached at this point; it's irrelevant and pride won't get you a bette price. Drive the car. Even if you're looking for 911s and you've driven thousands of other 911s, drive the car. DO NOT DISCUSS PRICE.
3) The salesman, hopefully, will ask if this is the car you want to take home. DO NOT LIE -- say "yes."
4) 90% of buyers today are payment buyers. Yet, they'll spend hours negotiating the price, the trade-in, the finance rate, etc. If you're paying cash, offer a realistic number and be quiet. By realistic, I mean one which allows the dealer a small profit -- you don't work for free and neither should anyone else. If you are a payment buyer, simply say "I can go to $550/month. I'll take delivery RIGHT NOW for that figure." Then be quiet. Most people talk themselves right out of a car deal by worrying about the money factor or the finance rate. If they can get to the payment I want, I don't care if they're robbing me blind on the rate; good for them. You will need to provide credit information at this time; don't take offense.
5) That's it. I bet it will work every time. If you are truly ready to buy RIGHT NOW, you can negotiate a great deal. You have leverage. If you're unhappy, walk out. If they can't get to your number, thank them for their time, and tell them to call you when they can get to it.
6) As for the finance office, you should know your payment before you walk in. In fact, I wouldn't dream of walking in there until I knew my payment. If you've put nothing down, get GAP insurance. If you want an extended warranty, buy one -- if not, don't. Most of the other stuff is crap.
Remember that you are in control and can always leave. Be honest about what you are trying to accomplish and you'll find the dealership experience FAR more agreeable. Sorry for the length.
@Buran
Lucky. I tried to order from the factory a civic and got screwed. Was called 24's before we were to pick it up that what we wanted wasn't ever made. I'd actually love to know how to buy to order if possible.
@iMike:"e) don't EVER finance at a dealer unless you get a loan rate subsidized by the mfg/mfg's finance company, and even then, run the numbers to see whether you're better off taking an additional discount."
This isn't always good advice. Sometimes the dealership can get you better rates. Have your best financing lined up and ready to go from your bank but be willing to tell them (AFTER negotiating a price) to put together their best finacing.
On another note: I haven't intentionally set this up but...it might also be possible to put pressure on your sales guy with a well timed 'new customer'. Story: last time I bought a car I was sitting at the guy's desk while he once again went back to his boss to clear my final handful of demands (half were reasonalbe-- the others were jsut me seeing what they'd let me get away with-- like a year's worth of car washes). While I sat there someone came in and talked to a different salesman and asked about the specific car I was looking at (used). They sent that guy away. Then I started making noises like I was done negotiating and was going to leave (and I was willing to--- I had a car that worked, this was jsut an upgrade) I suddenly got addditional traction in negotiation and got a better deal (and several extras--- like 6 free car washes) than I expected.
Maybe next time I'll try to send a friend in at the right time and play that game again.
Well, I used a few tricks here.
I started with a price in mind, knowing what I wanted and what I was willing to pay.
I needed financing, I hadn't worked it out with the bank, so I decided to negotiate the monthly cost down, while keeping the other numbers the same, the term, the downpayment.
In the end, all I cared about was how much I paid. You can factor what you think your trade is worth into your downpayment number which should never change if it makes it easier for you.
I went in to one dealership and haggled with them to get a taste for it and where they were willing to go with the low model of the car I wanted, even though I knew I wanted the high model. When they stopped, I walked away.
I then went into another dealership and began with the other dealership not offerring something that I needed - all dealerships are different, find out what they offer and use it. And told them the price I was willing to pay was equal to whatever I had previously negotiated, but tell them it's for the higher trim package.
They will tell you that it was a great deal and try to say they can't hit it. Let them go to the manager and "work it out", I did this and stuck to my guns - I ended up getting the car for $20 less a month than the other dealership as an "incentive" for going to them.
I also avoided other costs in the deal by negotiating the montly payment. If it was an add-on fee, I insisted it be rolled into the cost. The licensing cost got rolled in, as did the financing fee, the PDI and delivery cost - they tried about 15 different things to bring up the price.
On my inspection, I made it a white glove inspection, had the car re-cleaned and a couple of slightly scratched (and I do mean slight) parts replaced.
I think my salesman was very happy to see me go.
All in all, just more support for the premise that cars (depreciating assets) should be bought with cash.
Also, I've heard that if you buy your car from the Internet salesperson at a dealership you avoid all of this crap.
When the salesman sits down with his four-square, just grab it, crumple it up and say "we won't be needing that", and whip out yours.
@dorkbear: That would be all kinds of awesome.
You can take your car to Car Max and they will offer you a no haggle cash price for your car in under an hour that is good for 7 days and a few hundred miles. WHen I bought my car I did this and then took the CarMax offer to the dealership and said that if they couldn't match it I would sell it to Carmax. We worked on the other items such as finance rate (I already had a preapproval) but mostly we were able to talk about price which is what the dealer has the most impact on. They tried to match it but ultimately I ended up takgin it to CarMax which worked out fine. THey took the car and handed me a check. It was a bit of leg work but ultimately easier than negotiating with the dealership.
The only other thing I would add is:
Don't trade in your current car; sell it privately.
If you trade your car in, you're looking at two transactions instead of one, giving the salesman twice the ammunition to muddle the numbers.
Plus, they'll only offer you wholesale value on your car since they have to sell it again and make a profit. If you sell it yourself, you're getting retail value.
Obvious tips: make sure your car runs fine, is very clean, etc. Have it cleaned professionally, inside and out, it makes buyers more confident that you've taken care of your car, and makes the car more appealing as a vehicle that is ready to be driven away.
Unless your car is a sportscar, you don't have to worry too much about weirdos showing up to test-drive it. All the buyers who came to drive the few I've sold were normal folks looking for a decent car.
Why not take the dealer financing?
Start out telling them that you've already got a great deal with your credit union / bank, of course. And that the only things that need to be discussed are trade-in value and purchase price. (I don't let them discuss down payment, either.)
Once you've got the trade in and purchase price where you want them, then you offer to let them beat your pre-approved financing. I've never had one not beat it, yet. (Can you tell I buy new cars too often?)
I would love to see more of these car dealer (or other) insider articles!
Also... be wary of dealer financing. It may end up actually being "61 months" instead of 60. And you'll feel screwed once you find out that your interest is compounded _daily_, so they're robbing you on your effective APR as well (in effect, an invisible tax on your interest rate).
Even IF the dealership could offer me as good of rates as my credit union, I would pass.
This is where mobile internet really kicks a$$. Having a Treo, and being able to call their bluff on any numbers they pull out of the air, is a big help.
One other trick I encountered - I'd seen the car outside the dealer for about 3 months, and then magically when I happen to go in an ask about it, they have someone else come in and take it out for a test drive. Needless to say it was still there the next week, and this was likely just a buddy of theirs trying to create the impression that the car was "in demand" and I'd better make a deal fast.
Incidentally, the statement that all deals are handled this way is false.
I've bought many cars and never once seen a 4 square or been asked to sign anything in advance of making an actual purchase.
That's not to say that there isn't a lot of good advice there but the fact is that the 4 square isn't some universial tool.