How To Negotiate A New Car Price

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People who are looking to buy a new car are historically anxious about getting a good deal because of the legacy of the car salesman. Well-versed salesmen know how to make a deal seem like the best thing since sliced bread, only to have the buyers later find out the deal made was only in…

People who are looking to buy a new car are historically anxious about getting a good deal because of the legacy of the car salesman. Well-versed salesmen know how to make a deal seem like the best thing since sliced bread, only to have the buyers later find out the deal made was only in the best interest of the dealership. It’s not easy to negotiate a new car price, but with a little information, you can at least hold your own. Let’s take a look at one of the more popular negotiation tactics dealerships use.

The Lowdown on the 4-Square Tactic

negotiate a new car price
Avoid the 4-square technique!

Caveat emptor – let the buyer beware – is the mantra you need to take with you to the car lot. While sales personnel have several tricks up their sleeves, probably one of the most significant strategies used is known as the ‘4-Square Method’. This tactic involves a sheet of paper that is divided into four boxes. The boxes are marked with the following categories: trade value, purchase price, down payment, and monthly payment. The sheet of paper is said to help the buyer and the dealership make an agreement.

Surviving the 4-Square

The 4-squared sheet of paper will be the first item a buyer will look at when they sit down to negotiate a new car price at the dealership for either a new or a used car. On the top part of most worksheets will be a statement that says the buyer will buy a car today if the numbers are agreeable. The dealer will make the buyer initial the space next to the statement. Dealers assure drivers they will initial if serious. The sheet is then taken to the ‘secret place’ where the buyer can not see the sales person present the paper to the sales manager who is actually the negotiator. The manager will fill in the boxes and the sale mule will take it back to the buyer and go over each box. Any discontent from the buyer will be acknowledged but passed over.

What it all boils down to is this: the sales team wants to get the buyer riled up over all the other numbers but the price. Many buyers will be insulted about the high down payment costs and the low trade-in price, so much so they forget to look at the price. The sales person will ask the buyers which numbers don’t work for them and almost always the answer will be the down payments, followed by the trade-in value. At some point, the crafty salesperson will actually fold the paper to leave only two squares showing, one of which is not the price. They haggle over the numbers that are least important until the game ends and the buyer thinks they got what they wanted. In reality, the most important factor – the overall price – was completely ignored and left unchanged.

While not all dealerships will use the 4-Square negotiation technique, many will. The only way you can avoid being taken for a proverbial ride is to understand how the tactic works and how you can successfully negotiate a new car price. Here is what you need to know:

How to Walk Away With the Right Deal on a New Car

Get Your Own Financing Before Visiting the Dealership. While dealerships would be happy to help you through the process of in-house financing, it certainly puts you at a disadvantage. Before you even think about hitting the sales floor, you should visit your local bank, credit union, or shop for other lenders to new car financing. If you arrive with financing completed, the car salesperson may be more forthcoming with you about details since they don’t have to play the payments game. The dealership may still try and beat the interest rate you secured but it’s not worth the effort. Know before you go and you can save a lot of cash and hassle.

Focus on the Price. While the 4-square paper puts focus on four things at once, your only concern should be the price. It will be the focal point of your negotiations. If you have already secured financing, you’ll already know how much you can afford. You can more effectively haggle over the price if you are confident about the amount you want to pay. Check out the following locations for price quotes:

Do the Legwork. There are many online resources available to you know to accurately calculate a good price for new vehicles. These sites will also help you accurately understand the value of any trade-ins you have. By researching the numbers before you leave the house, you’ll be able to take an effective stand against whatever the dealer is throwing at you. By understand how pricing works, you have the upper hand in negotiations because you will know right from ridiculous.

Here are more car buying tips that may help you get a good deal on your next vehicle.

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About Ryan Guina

Ryan Guina is the founder and editor of The Military Wallet. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

Featured In: Ryan's writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.

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  1. Robert says

    Great article. As you say doing the legwork is key. Use the message boards at Edmonds.com and kbb.com to find out the best prices people are actually paying for their cars rather than the false numbers the dealers will give you.

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