Used car dealerships train their salesmen to use these tactics to maximum profit. Find out how not to get ripped off by used car dealerships.
Used Car Dealerships Tactics
Car dealerships are in the business of selling cars so it makes sense that they will do all they can to make the most out of every customer that walks through their doors. Dealerships train their salesmen and give them valuable skills and tactics that they can use to the end of maximum profit.
The most valuable tactic in this regard is the four-square method.
The Four Square Method Rip Off System
If you have ever bought a car before, you probably know what a four-square figure is since the dealer probably brought it out as soon as you sat down. The four squares are named as follows:
- Trade-In: the value of the car you are trading in.
- Price: the price of the vehicle that you intend to purchase.
- Down Payment: the amount of money you will use as a deposit if you are not paying for the car in cash.
- Monthly Payments: the amount of money you will be paying the dealership every month if you choose to finance the vehicle purchase.
Once you arrive at the dealership with your present car that you would like to trade in, the salesman will automatically start noticing and asking about the flaws in the vehicle and devaluing your car. Some devaluing factors include mileage, tire scuffs and body dents.
The salesman will then quote you a trade-in figure after doing some calculations based on the devaluations. The trade-in figure is usually quite low as it is meant to encourage you to buy a new vehicle at the dealership.
The salesman will then give you the cash price of the new vehicle that you intend to purchase. If you would like to finance the vehicle, he/she will also quote you a down payment of the vehicle and different rates of monthly payments that are available for the car’s price.
What every car buyer should know is that every piece of the four square is a negotiation piece. Car dealerships really make their money on the down payment and the monthly payments when you decide to finance the vehicle as they have the highest profit margins.
All the after-sale options such as warranties and rim insurance are usually inconsequential. The dealership’s service center has the second highest profit margins with new vehicles having the least profit margins in the dealership.
Dealerships can only mark up new cars by so much as they are almost equally priced across the country. A brand-new car with an MRSP will cost the same across most states in the US.
How To Negotiate On Your Used Car Value
What most car buyers do not know is that the numbers on the four squares are largely meant to offend you. The dealerships want you to negotiate and bring the number down so that you fell that you are getting a better deal than the dealerships are.
The salesmen will often go through the numbers very swiftly and then ask you to sign your initials on the dotted line. The initialing portion is crucial as it is a symbol of trust and commitment.
It is significantly harder to go back on your word after you have already signed your initials even though you recognize that it is a raw deal. It is a very important psychological tool.
The salesman will then ask you which portion of the square can they adjust for you to buy the car. If you are smart, you should say all of them. However, most buyers simply say the down payment and the monthly payment.
Since most buyers will be concerned with not having enough to make the down payment they will start by asking the salesman if they can lower the down payment. The salesman will then often go talk to his/her manager and then come back and tell you that a reduction is possible but it will mean an increase in the monthly payments which is the area on which most dealerships are focused.
The salesman can also reduce the amount of monthly payments if you cannot afford it but will extend the repayment terms. They will then take it to the manager and come back with a deal for you to sign.
If you are willing to pay cash for the car, most dealerships won’t negotiate that but will instead try to exponentially reduce your present car’s trade-in value. The dealerships already know how much they can get for the car.
To understand the four-square tactic will reduce the chances of you getting ripped off at a dealership. You can even go into your local credit union and get a pre-approved check or loan for the car you want to buy. You often get lower interest rates and it also helps to keep your trade-in to yourself or present it last.