This is how American car dealers use the ‘4-square method’ to make big profits off you

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Don’t miss How the four-square method works Avoid falling for a car dealer’s strategy Do your research before you go Get preapproved for a car loan independently Look at total costs What to read next

Car dealers aren’t always known for prioritizing your budget — and the lengths some will go to to separate you from your hard-earned money are greater than you might think.

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 it 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 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 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 the amount of your monthly payment. They want to convince you the vehicle is in your budget if you can manage the monthly costs — no matter how many months it takes.

Unfortunately, dealers aim to lock 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. You also pay more in interest over time, 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.

Insurance costs are an important factor to consider. Due to new tariffs on imported cars and auto parts from Canada and Mexico, your premium could increase by an average of 8% by the end of 2025, according to a study by Insurify — going from $2,313 a year up to $2,502.

Whether you’re in the market for a car or not, you can always benefit from doing a little comparison shopping on your policy. This used to take hours of research, but not anymore with free services like OfficialCarInsurance.

OfficialCarInsurance helps you instantly sort through the best policies from car insurance providers in your area, including trusted names like Progressive, GEICO, and Allstate. With rates as low as $29 per month, you can find coverage that suits your needs and potentially saves you hundreds of dollars per year.

To get started, fill in some basic information and OfficialCarInsurance will provide a list of the top insurers in your area.

The more you find savings for other car costs, the more money you can put toward your monthly car payments to pay off your loan faster.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Avoid falling for a car dealer’s strategy

Fortunately, you can avoid being fooled by the 4-square method — or any other methods dealers use to squeeze every dollar out of you. Here’s what you can do to ensure you pay a fair price.

Do your research before you go

An informed customer is less likely to be swindled, so doing your own research can help you stick to a budget that makes sense for you. The Kelley Blue Book and AutoTrader can be a good way to find out the going rate for a car so you’ll know how much you can expect to pay.

Get preapproved for a car loan independently

You don’t have to borrow from the dealer when buying a car. While they sometimes offer great incentives, the rates are often comparable to car loans from private lenders.

If you pass up dealer financing, they have fewer chances to tack on hidden costs or trick you into a low payment over an extended loan term.

Take the time to shop around, compare rates and find out what you can afford with a reasonable loan term. That way you can leverage your pre-approval at the dealership and see if they can offer a lower rate.

Look at total costs

Dealers use the four-square method to present so many numbers that you won’t notice they aren’t disclosing the total costs. The problem is that not understanding the actual price you’re paying can lead to bad choices.

If you have already been taken in by the four-square method, it’s not too late to lower your costs so you can make your car payments more affordable, allowing you to pay-off high-interest debt faster.

Credible makes it easy to streamline your debt payments so you aren’t juggling paying off multiple lenders at different rates. Its online marketplace of vetted lenders provides personal loan offers based on your needs, allowing you to pay off your car loan more efficiently at a fixed rate.

Consolidating your debt with a personal loan from Credible can be the first step towards more financial freedom and getting out from under that damaging debt.

When buying a car, don’t let the dealer drive your decision making — and don’t let them confuse you. Go in with a clear budget and an understanding of what the car should cost. If the dealer doesn’t align with your financing needs, find a lender that does.