The Before the Lot method

1. See the four-square for what it is

Many dealerships work a deal on a sheet split into four squares: the trade-in, the price of the car, the down payment and the monthly payment. The squares are connected, so a number given up in one can be taken back in another, and four moving numbers are hard to follow across a desk. A dealership also tends to earn more from financing and the products sold with it than from the car's price. Seeing the sheet this way is the starting point: three of the squares can be settled at home with documents, which leaves one number to discuss at the dealership.

What to collect

• The car. Year, make and model, and whether it's new or used. A trim level if one is in mind.
• State. The state where the car will be registered. Tax, doc-fee rules and title fees follow it.
• Trade-in or not. Whether a current car will be sold or traded as part of the purchase.

What it decides

A plan with a place for each square: trade-in, down payment and financing marked to be locked at home, and price marked as the one open number.

Done when

Each of the four squares has a status: three to be locked at home (trade-in, down payment, financing) and price left open.

Guides for this stage

• How the four-square works against you: The dealer's worksheet has four squares so the deal can move between them. Lock three before you go.
• Payment is an output: Your monthly payment is math on price, APR and term. Settle those three and the payment follows.

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2. Lock three squares at home, in order

Each of the three squares is fixed to a document before any dealer is involved. The trade-in goes first: two or three written offers from buyers such as online car buyers or a lender's partner program, with their expiry dates. The highest offer is the floor any dealer appraisal is measured against, and in many states a dealer trade also lowers the sales tax, which changes what each offer is worth. The down payment comes second, chosen from the buyer's own budget; it lowers the amount borrowed but not the price of the car. Financing comes third: a pre-approval from a bank or credit union gives an APR, a term and a maximum amount, and that rate is the one any dealer financing is compared with, on the same term.

What to collect

• Written trade-in offers. Each offer's amount and expiry date, from two or three buyers.
• Payoff on the current car. What is still owed on the car being sold or traded, or zero.
• Down payment. The cash amount set aside for the purchase, chosen from the buyer's own budget.
• Pre-approval. The lender's APR, term in months, maximum amount and expiry date.
• State. Whether the state taxes the price minus the trade-in changes what a dealer trade is worth.

The three locks, in order

1. Trade-in. Document: Two or three written offers for the current car, each with its expiry date. Result: The trade-in floor (the highest written offer) and the equity after any payoff, which can be negative.
2. Down payment. Document: A down payment amount chosen from the buyer's own budget. Result: A fixed cash amount that lowers what is borrowed and is not discussed until the price is agreed.
3. Financing. Document: A pre-approval from a bank or credit union. Result: The APR, term and maximum amount that dealer financing is compared against.

What it decides

Three locked squares: a trade-in floor and equity, a fixed down payment, and a pre-approved APR and term.

Done when

The trade-in floor, the down payment and the pre-approved APR and term are each written down with the document behind them, and the offers and pre-approval are still within their expiry dates.

Guides for this stage

• Get three written offers: A real, written offer for your car beats any estimate. Get two or three before you talk to a dealer.
• The walk-around appraisal: The walk-around that finds every scuff is building a case for a low trade number.
• Why they go to down payment first: Asking about your down payment early finds the cash you have and steers the talk toward a monthly payment.
• Loan-to-value and being underwater: If you owe more than the car is worth, you're underwater. Your down payment and term decide for how long.
• Bring your own financing: A pre-approval from your bank or credit union sets the rate a dealer has to beat to earn your loan.

Longer guides

• The trade-in: offers, equity, and the order of the talk

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3. Leave one square open: price, as an out-the-door total

With three squares locked, price is the only number left to discuss, and it is discussed only as an out-the-door total: the vehicle price plus the doc fee, any dealer add-ons, sales tax, and title and registration. A vehicle price alone can be offset by fees or add-ons on another line, so two quotes compare fairly only as totals. This stage also gathers what the maker is offering on the car, such as cash back or a promotional APR, and compares the two over the same term at the pre-approval rate, because the choice changes the amount financed and, in some states, the tax.

What to collect

• The car. Year, make, model and trim, new or used.
• State and tax rate. The state, and the local sales tax rate where it is known.
• Maker's offers. Any cash back or promotional APR listed on the maker's official offers page, with its term.
• Pre-approval rate and term. Used on the cash-back side when the two offers are compared.

What it decides

The open square defined as an itemized out-the-door total, an estimate of that total for the car, and the cash-back and promotional-APR choices compared by total cost.

Done when

There is an out-the-door estimate for the car with each line shown, and any maker offer has been compared by total cost over the same term.

Guides for this stage

• Out-the-door is the only number: Price, fees, add-ons, tax and title, all in. Dealer quotes only compare fairly as out-the-door totals.
• Rebate or low APR?: Manufacturers often offer cash back or a low promotional rate, not both. Run the numbers before you choose.

Longer guides

• How to read an out-the-door quote, line by line
• Cash back or a low APR: how to compare the two offers

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4. Set the numbers before any dealer speaks

Four numbers are set at home and written down. The budget ceiling is the highest out-the-door total the locked squares and a monthly amount that fits the budget allow. The fair price comes from research on what similar cars sell for nearby. The opening offer is a first out-the-door number below the fair price. The walk line is the out-the-door total above which the buyer leaves; it sits below the ceiling and close to the best real quote, and it also covers a deal whose numbers change from what was confirmed in writing. Setting them before the first quote matters because a first number written high on purpose works as an anchor, and every later number gets judged against it.

What to collect

• Monthly amount that fits the budget. The highest monthly payment the buyer's budget allows. It stays with the buyer and isn't told to a dealer.
• APR and term. From the pre-approval locked in stage 2.
• Down payment. From stage 2.
• Trade-in equity. From stage 2; negative when more is owed than the floor offer.
• Fair price research. What similar cars sell for nearby, from pricing guides and listings.
• State. For tax and fees inside the out-the-door total.

What it decides

Four written numbers: budget ceiling, fair price, opening offer and walk line, all as out-the-door totals.

Done when

The ceiling, fair price, opening offer and walk line are written down as out-the-door totals, with the opening offer at or below the fair price and the walk line at or below the ceiling.

Guides for this stage

• The walk line: Decide at home the out-the-door number above which you leave, then let that number decide for you.
• The first pencil: The first numbers on the sheet are often set high on purpose, so beating them down feels like a win.
• Payment is an output: Your monthly payment is math on price, APR and term. Settle those three and the payment follows.
• A few dollars a month adds up: A few dollars a month sounds small. Over a long loan, it adds up to more than a thousand dollars.
• Loan-to-value and being underwater: If you owe more than the car is worth, you're underwater. Your down payment and term decide for how long.

Longer guides

• Lease basics: the numbers on a lease quote

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5. Make dealers compete in writing

Several dealers are asked by email for an itemized out-the-door quote on a specific car, identified by stock number or VIN. Each quote is read line by line: the doc fee is checked against the state's rule, dealer add-ons are listed separately with their prices, and the tax line is checked against the state and local rate. Quotes are ranked by their totals and measured against the walk line. A lower written quote can be shared with other dealers to see whether they match it, and the chosen dealer confirms the final total in writing before the visit. Dealers whose quotes don't fit get a short reply saying so.

What to collect

• Dealers and cars. Business names of the dealers and the stock number or VIN of each car. No personal details of the buyer.
• Quotes. Each quote's line items: vehicle price, doc fee, add-ons, tax, title and registration, and the total.
• State. For the doc-fee rule and the tax check.
• Walk line. From stage 4.
• Decision date. The date by which a decision will be made, given in the emails.

What it decides

Quotes ranked by out-the-door total, each marked over or under the walk line, with doc fees checked against the state's rule and add-ons separated; and one quote confirmed in writing, or none yet.

Done when

A dealer has confirmed in writing an itemized out-the-door total at or under the walk line, or no quote is under it and the search continues.

Guides for this stage

• Out-the-door is the only number: Price, fees, add-ons, tax and title, all in. Dealer quotes only compare fairly as out-the-door totals.
• The first pencil: The first numbers on the sheet are often set high on purpose, so beating them down feels like a win.
• The walk line: Decide at home the out-the-door number above which you leave, then let that number decide for you.
• The F&I office: After you agree on a price, a finance manager offers optional products. Some can make sense, at the right price.

Longer guides

• Before a deposit on a used car: history, inspection and what to get in writing

Email templates

• Ask for an itemized out-the-door quote
• Invite a dealer to beat a better quote
• Make an out-the-door offer
• Confirm the deal in writing before you go
• Email your lender about the car and the numbers
• Politely say no thanks

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6. At the desk

At the dealership the written out-the-door total is the reference for everything. The price is settled before the trade-in comes up, so neither number can hide in the other, and the down payment isn't discussed until the price is agreed. A monthly payment isn't named, because it is the arithmetic of the amount financed, the APR and the term. Worksheets aren't initialed. The finance office's products, such as a service contract or GAP, are optional and are priced as totals, not monthly amounts. Dealer financing is compared with the pre-approval on the same term. If the total is above the walk line, or differs from what was confirmed in writing, the walk line decides.

What to collect

• Confirmed out-the-door total. The total the dealer confirmed in writing, with its line items.
• Walk line. From stage 4.
• Pre-approval. APR, term and amount, for comparing any dealer financing offer.
• Trade-in floor. The best written offer, for comparing the dealer's appraisal.
• Finance-office products. Each product offered, with its total price and whether it is added to the loan.

What it decides

A final contract whose lines match the written out-the-door total, the locked squares and any products chosen at their total prices; or a decision to leave.

Done when

The contract's price, fees, add-ons, APR, term and amount financed match the written deal line by line before signing, or the buyer has left.

Guides for this stage

• Disclose the trade last: Settle the price as if you have no trade. Bring it up after, so neither number can hide in the other.
• Why they go to down payment first: Asking about your down payment early finds the cash you have and steers the talk toward a monthly payment.
• Payment is an output: Your monthly payment is math on price, APR and term. Settle those three and the payment follows.
• A few dollars a month adds up: A few dollars a month sounds small. Over a long loan, it adds up to more than a thousand dollars.
• Hold off on initialing the worksheet: Being asked to initial the worksheet is a small yes that makes the bigger yes feel already decided.
• The F&I office: After you agree on a price, a finance manager offers optional products. Some can make sense, at the right price.
• The walk-around appraisal: The walk-around that finds every scuff is building a case for a low trade number.
• The walk line: Decide at home the out-the-door number above which you leave, then let that number decide for you.

Longer guides

• Finance-office products and what they typically cost

What people say at the desk

• You're asked what monthly payment you're looking for. “I'm not shopping by payment. My financing is already set, so I'm comparing out-the-door prices. What's your best out-the-door number on this car?”
• You're asked about a trade-in before the price is settled. “I'd like to settle the price of this car first, as a deal on its own. Once we agree on the out-the-door number, I'm happy to talk about anything else.”
• You're asked how much you're putting down. “I'll decide that once we've agreed on the out-the-door price. Let's start there.”
• You're asked to fill out a credit application before you've agreed on a price. “I'm already pre-approved, so there's no need to run my credit to agree on a price. If you'd like to try to beat my rate after that, I'm open to it.”
• The numbers at the desk don't match what was agreed in writing. “This total is different from the out-the-door price you confirmed in writing. If you can match the written number, I'm ready to go ahead. If not, I'll head out.”
• The quote includes dealer add-ons you didn't ask for. “I didn't ask for these add-ons. Could you take them off the price, or show me the same car without them?”
• You're asked to initial or sign the worksheet so it can go to the manager. “I'll hold off on initialing anything until the final paperwork. You're welcome to take my out-the-door number to your manager as it is.”
• You're told the price is only good today. “I understand. I don't make this kind of decision under a deadline. If the price is gone tomorrow, that's okay with me.”
• You're told the dealer can get you a better rate. “Great, I'd like to see it. Please show me the APR in writing on the same term and amount as my pre-approval, with the out-the-door price unchanged.”
• The F&I office offers a warranty, protection plan or other product. “No, thank you. I'd like the contract to cover just the car, tax, title and the fees we agreed on.”
• A product is described as costing only a few dollars a month. “What's the total price of that product, and how much does it add to the amount financed? I'd rather decide on the full number.”
• A charge is added on top of the price for a paint color, a market adjustment or another dealer markup. “Is this charge on the maker's window sticker, or added by the dealership? I'm comparing out-the-door totals from several dealers, so I'd like to see the total with everything in it, and the same total without this charge.”
• You're told your offer is below invoice, or that the dealer would lose money at your number. “I understand. I'm comparing written out-the-door quotes from several dealers, and this is the number that works for me. If you can't get there, that's okay; I'll keep comparing.”
• Your trade-in is valued below a written offer you already have from another buyer. “I have a written offer for my car that's still open, and it's higher than this. If you can match it, I'm happy to trade it in here. If not, I'll sell it to them separately and keep this deal to the car's price.”
• You've decided to leave. “Thank you for your time. This isn't going to work for me today. You have my email if anything changes on your end.”

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7. After the lot: a payoff plan

Once the car is bought, the loan has an amount, an APR and a term. Early payments carry more interest, so money paid on top of the regular payment and applied to principal shortens the loan and lowers the total interest, and the effect builds on itself. A payoff plan shows the months and interest with and without an extra amount, including months when nothing extra is paid. Lenders differ in how they apply extra payments and whether they charge a prepayment penalty. A refinance offer can be compared with the current loan by total remaining cost.

What to collect

• The loan. Amount financed, APR, term in months and the payments made so far.
• Extra each month. An extra amount toward principal, and how many months it is likely to be paid.
• Refinance offer. Any new rate and term on offer, with its fees.

What it decides

A payoff date and total interest with and without the extra amount, and a refinance offer compared by total cost where there is one.

Done when

The payoff date and total interest are known for the planned extra amount, and the lender's handling of extra payments and any prepayment penalty is confirmed.

Guides for this stage

• Paying extra: Extra payments go straight to the balance, so a little more each month can cut months and interest from a loan.
• Loan-to-value and being underwater: If you owe more than the car is worth, you're underwater. Your down payment and term decide for how long.

Do this in the planner