Everyone needs to make a dollar—you can’t begrudge people that. But when that dollar comes at your expense, you need to be informed enough to protect yourself. WhiteBoard Finance has put together a presentation that warns you about how to protect yourself from the schemes that car dealerships use to rip you off.
The video’s host, Marko, actually worked at a car dealership after graduating from college, and learned the strategies used by dealerships. One of the tactics is the four square method. The method uses four areas—Trade-in, Price, Down Payment, and Monthly Payment. Each of the squares is a negotiation chip. With financing being the profit centre for dealerships, the idea is to get the most out of you there. The second highest earning area is service. New cars are actually the lowest profit centre—used cars actually earn more money.
Dealers artificially inflate the numbers used in the four squares, with the exception of the trade-in value. Those inflated numbers are actually meant to make you feel like you’re taking advantage of them. When negotiation starts, most people go straight to the down payment. The salesperson will try to keep you there and in the monthly payment square. Instead, Marko recommends going in with your financing already in place. He also recommends holding back your trade-in until the very end.
Marko pulls back the cover over the antics of dealerships, and if you’re considering a new car, it’s worth the watch.