‘The 4-square method’: Here’s how American car dealers make big profits — and how not to get fooled

Car dealers aren't always known for prioritizing your budget. While most people realize this, the lengths some dealers go to to separate you from your hard-earned money is more extensive than you might think.

For example, most car shoppers have never heard of the four-square method, although it’s often used to convince you to make a big financial commitment without the full picture.

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Here's how this method works, along with some tips on how to avoid falling into a car dealer's trap.

How the four-square method works The four-square method is a simple but effective technique. Its name refers to the dealer making four squares on a piece of paper. The squares contain the following figures:

• The value of your trade-in
• Your down payment
• The price of the vehicle you're buying
• The monthly payment for your new car

Writing this info down might seem innocent, but there are a few big problems.

First, it can easily confuse you by including many different numbers. This can be overwhelming, especially since dealers often cross numbers out and write them all over the sheet, causing you to lose track of what's happening.

Dealers sometimes try to obscure the car's total costs when using this method. Instead, their goal is to get you focused on monthly payments. They want to convince you that it's affordable if you can manage the monthly payment.

Unfortunately, dealers often put you into long-term car loans to make that price appear lower. But what it does is increase the total cost of the car, leaving you in debt for longer and owing more interest, which is never good considering you also have to account for the ongoing cost of car insurance. Of course, the total cost is nowhere to be found on the squares.

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