Hurricanes are traded in the form of futures contracts along with other weather products. Although you can’t buy or sell a hurricane, there are other reasons that investors invest money in to these monster storms.

Don’t know much about a futures contract and you can’t think of any possible way that investors could possibly trade a hurricane? Keep reading. We’re going to learn everything we need to know about these futures contracts.

Futures Contracts?

Individual investors don’t often delve in to the futures market unless they are buying and selling shares of an exchanged traded fund that track the movement of a certain futures contract. A futures contract is a contract between a buyer and seller where the buyer agrees to buy something at a set price sometime in the future. If somebody were selling corn futures, the seller would agree to sell corn to the buyer at a certain price sometime in the future.

Of course the buyer wants the market price of corn to be higher than his futures contract because he could immediately sell the corn and make a profit. The worst case scenario would be that the buyer has to take delivery of his corn at a price higher than the current market price but that’s the risk of being a futures trader.

Hurricanes are a little bit too big to package up and sell to somebody so how does this hurricane futures contract work? In the investment world, everything is bought and sold including signed contracts. That buyer of corn may not hold his futures contract to maturity. He’ll wait for the value of the contract to rise and sell it to somebody for a profit. This is one way to make money on hurricane futures.

The value of the contract rises as the storm gets closer to making landfall and/or strengthening and the value falls as it moves away from land and/or weakens. Contracts are available for trading once a named hurricane forms and it is settled or terminated when the National Hurricane Center gives its last advisory on the storm.

Who needs it?

Hurricane futures aren’t designed for retail traders to make a profit. Instead, they are often used by insurers, reinsurers, energy traders, and large institutional clients as a hedge. In the investing world, when you hedge something you’re protecting or insuring your money. If a large hurricane is forecast to enter the Gulf of Mexico and strengthen, a person who is short energy (betting that the price will fall) may purchase hurricane futures contracts to hedge his oil position.

If the hurricane strengthens, the futures contracts rise in value and since a strong hurricane could shut down offshore oil rigs, refineries, and shipping lanes, the price of oil or other energy product may rise making his short position in energy drop in value. With his futures contracts rising in value and his short investments falling, his money is protected.

Seem a little complicated? It is and that’s why these types of investments aren’t meant for the individual stock trader. Although it is possible to use hurricane futures as a way to make a profit, they are used primarily as insurance for large, professional traders. This investment product is best left to the pros.

If you invest in gold as a hedge, these fluctuations shouldn’t sway your convictions about the precious metal. The experts say the fundamentals are still there, and that nothing has changed. Maybe you don’t care about the fundamentals since you don’t believe in fiat currency and are willing to hold a hard asset no matter what.

Many people also believe in gold because of the status it provides. How many people have you seen adorned in gold – watches, necklaces, earrings, and rings. Even after those desires to impress fade, the gold is still worth something and people forget you can get cash for gold. Cash in your pocket is much better than jewelry collecting dust in your drawers.

If you listen to someone who has the gold bug, every time is always the right time to catch the “Midas Touch” and turn your fake assets into real ones. The government is crumbling and on the verge of failure….

As Forbes notes, gold follows a “Buy the Rumor Sell the Fact” pattern. Fear can drive the commodity’s price, but fulfilling loans and obligations requires liquid currency. Paying off liabilities means selling assets like gold.

No matter your reason for holding the previous metal, remember prices are based not on earnings or dividends, but what the person next to you is willing to pay.

Returning the “Credit where credit is due”.  The inspiration for this article came from

It’s time for me to take a deep breath and step back from monitoring the market.  After last week’s roller coaster, I’m too drained to worry about what will happen this week.

If you’ve ever played Roulette, those precipitous gyrations reminded me of betting on RED or BLACK.  A rather simplistic choice with devastating consequences,   you either win or loss.

Being a rather conservative investor, I’m of the “Go Long – Go Vanguard” approach through low-cost indexing; however, it’s undeniably hard to resist the mountains of financial products and tactics available.

Chatting with a friend who works in finance, we reviewed the different option strategies for hedging against short term losses.  Even as a Chartered Financial Analyst (CFA), he admitted having a limited grasp on the actual execution of these theories.  Both of us have resolved to spend the time to learn more about these after our respective obligations (Him: GMAT & marathon, Me: GRE & half-marathon).

From there it was a slippery slope.

Scanning for new purchases in convertible securities and long-short funds, the concern spread into my overall investment strategy and current holdings.

Did I have enough here?  Should I exit out of there?  Was there something I was missing?

SELL! SELL! BUY! SELL! BUY! BUY!

Nothing actually happened, but the situation definitely had me concerned…

To quote the Boglehead: “The point is, the last few weeks were a time when some risk showed up, and your job is to process it. The temptation is to deal with the discomfort by choosing a prediction. Don’t. Your job is to confront the reality of that uncertainty, that you do not know what will happen, and can only make the roughest guesses as to the likelihood of all these scenarios.”

Not until today’s drop did it finally hit me.  These emotions emulated exactly the sentiments I wrote about in two recent articles: When Blogging Isn’t Blogging Anymore & Where the REAL Money Is.  A great book was also written on this very topic – The Paradox of Choice.

We are so inundated with choices it paralyzes our actions.  When the auxiliary aspects of blogging overwhelm our attention, more time is spent on inconsequential upkeep and away from writing.  When we concentrate on the more lucrative jobs out there, we forget about developing our current career.

In a nutshell – We lose our focus!

Distracted from our underlying goals, we’re left looking in both directions instead of charging ahead.  Now is not the time to change with the direction of the wind, but rather reaffirm our convictions.

This is why Mike advocates doing three things during a downturn:

1. Rebalance Portfolios
2. Harvest Tax Losses
3. Assess Risk Tolerance

“Risk tolerance isn’t just about your ability to deal with abstract market declines. It’s about your ability to stay calm while your portfolio is tanking.”

So hopefully you’ll use this time to calm your nerves, assess your risk, and stay the course.

]]> http://www.engineeryourfinances.com/2011/08/investing-overload-reflections-freak-out/feed/ 4 http://www.engineeryourfinances.com/2011/08/ez-ipo-profits/?utm_source=rss&utm_medium=rss&utm_campaign=ez-ipo-profits http://www.engineeryourfinances.com/2011/08/ez-ipo-profits/#comments Wed, 03 Aug 2011 23:33:04 +0000 Fin Engr http://www.engineeryourfinances.com/?p=1879 People have been following the debt-ceiling debate for the past few weeks, but my attention was elsewhere.  It’s fascinating what information garners headlines while others get brushed aside.

Four mainstreet brands have had initial public offerings within the past two weeks.  I also looked at two other, recent name-brand offers for the purpose of this article.

• Teavana (TEA) on July 28^th
• Dunkin’ Brands (DNKN) on July 27^th
• Zillow (Z) on July 20^th
• Skull Candy (SKUL) on July 20^th
• Pandora (P) on June 15^th

and of course…

• LinkedIn (LNKD) on May 19^th

The first day action on these offerings was perplexing to say the least.  From the pricing range – to the adjusted price- to the open, these stocks seemed to jump by leaps and bounds.  Outside of Skull Candy, every other company came out of the gate 25% higher (or more) than the final IPO price.

With LinkedIn, articles suggesting the underwriters had undervalued the company began surfacing.  They accused the underwriters of shortchanging LinkedIn for their own profit given that their services were paid for with a portion of shares.

All of the other companies listed here appeared to follow suit after LinkedIn.  Even after the pricing ranges were raised 20% or more, these stocks still opened much higher – 185% in the case of Zillow.

Were all of these original estimates just plain wrong?  It’s possible considering the same firms appeared in various combinations as the lead underwriters: Morgan Stanley, JP Morgan, Merill Lynch, Goldman Sachs, and Citigroup.  But what does that say about analysts’ estimates in general?

Or it could also be possible they manipulated the system to keep the initial offerings artificially low.  With their reputations on the line, would they risk future underwriting on a few new stocks?

Possibly…

Offerings like these don’t come around that often, and with Tech Bubble 2.0 scares, you don’t want to be left holding the stinky fish at the end of the day.  Why care about valuations or future earnings when all you need to profit is be a part of the IPO.

Like a slimy catch-phrase, “with IPOs – you’re in the know”

While others diligently review the filings, spend hours on analysis, and try to project the company’s success or failure – you could double your money in a matter of minutes without any thought.

So here’s the EZ IPO Profits Gameplan:

1. Ignore all news about the US Economy
2. Watch IPO filings
3. Ask Aunt Nelda or Uncle Roger if they’ve heard of company XYZ
4. Ignore all news about company XYZ
5. Purchase as many shares as you can handle
6. Sell immediately at market open
7. Move to Tahiti with proceeds

And everyone knows what’s next… Facebook

Keeping up with the fine print can be tedious (and boring), but something that requires your attention.  While expenses and fees have been curtailed in some regards, banks have been using creative means to make up those “losses” in other areas.

One of my credit cards recently sent a letter notifying me an annual fee was being introduced based on the average spending.  If you balance exceeded $1K you’d only have to pay $35/year and if it was under – $55/year.  Considering how I barely use this card because of the other reward credit cards, I was quite upset.  Cancelling the card wasn’t an option since it’s my oldest account – so I decided to call customer service.

Explaining the situation, they generously offered to only charge me the $35 instead of the $55.  Sorry, no thanks.  After a brief hold, they came back and said they would waive the fee indefinitely as long as I kept the account opened.  That was easy enough!  The entire conversation took around 7 minutes and saved me $55.

What was so interesting was how easy and quickly it was resolved, seems like there’s been a shift in the customer service mentality.  Gone are the days of yelling and threatening Better Business Bureau complaints (to an extent).  Of course, if this conversation took more than an hour as I was transferred between managers maybe it wouldn’t have been worth the time.  But $55 in 7 minutes equates to a billing rate of $385/hour – much more than I actually make.

So next time you think of trashing that credit card notice before reading it, take the time to review the details and see how it will affect you.  A minor tweak could end up meaning big savings on your part!

The start of the year is notorious for leaving you with a financial headache, the holidays have passed and money has inevitably been spent, but as we approach the months ahead you should be aiming to do something about it.

A financial spring clean is all about making your money work better for you, and you can do this by reviewing all aspects of personal finance, from your debts to your spending and saving until you can make your money go that extra yard.

To get started on your financial spring clean you should first get into research mode. Collect as many bank statements and utility bills as possible, including any debts and automatic payments you make on a regular basis. This should give you a quick snapshot of your financial situation.

Once you have an idea of current financial state it’s time to decide on some possible plans of action. Firstly, do you have any credit card debt? Can you move this debt on to an interest-free balance transfer credit card to save you some money while you pay it off?

Once you’ve dealt with your debts it’s time to analyse your bills, do you have any renewals coming up like car insurance? Have you searched elsewhere to see if you can find a better deal? Never be happy with the price you’re quoted, always go back to the insurance provider to see if you get yourself a bigger discount.

Do you have a phone contract? And if so, do you use your allocated monthly allowance? If not, then see if you can downgrade to get a cheaper deal that will help you to save money. All of these changes seem small, but when you add them all up they can make a big difference.

Once you have analysed all your bills and debts, its time to look at your financial stability as a whole, and to do this it’s worth purchasing a detailed credit report. Companies like Experian for a small fee will provide you with a detailed examination of all your finances. If you notice anything strange with any of your figures then get your report queried with a credit reference agency straight away.

For the next step ask yourself the question, do you get the most out of your money? Do you make your savings work for you? Look at your type of bank account and see whether it would be worth switching to reap the benefits.

Do you have a savings account? If not, you could consider putting your money into an LSA (Lifetime Savings Account) in the US, or if you’re UK based a cash ISA. If you do have a savings account then check your account against the market leaders to see if you could make your money go further by getting a better interest rate.

All of these little changes can make a huge difference to your overall financial situation, and you should always be striving to get the maximum return on your money that you work so hard to earn.

This article was written by the money team at moneysupermarket.com.

Produced by SmallBusinessLoansDirect.com, visit us for merchant cash advance.

By H&R Block’s Leigh Mutert, CPA and hrblock.com Community Manager

These child tax credits and deductions can mean a tax refund for you!

There are many money-saving tax credits and deductions that can reduce the tax burden on families with children. The Child Tax Credit, Child Care Credit and the Earned Income Credit can all mean tax savings for families with one or more children. Remember, a tax credit is a dollar-for-dollar reduction of the taxes you owe.

Child Tax Credit

The maximum Child Tax Credit is $1,000 each qualifying child under 17. Because this is a partially refundable tax credit, even taxpayers who do not owe taxes are eligible if they have earned at least $3,000 in 2010. If you have four children, the credit can cut your tax bill up to $4,000.

Income Requirements: When income exceeds $110,000 (married filing jointly), $55,000 (married filing sep.) and $75,000 (all others) the child tax credit begins to phase out. If parents are divorced or separated, the parent who claims the child as a dependent is eligible to claim the child tax credit. This is true even if the parent’s filing status is married filing separately. The Child Tax Credit Table can help you determine if you are eligible for the full credit amount of $1,000.

To maximize the benefit of each credit, you must take the nonrefundable credits in a specific order. (You must sometimes calculate other credits first to properly apply the child tax credit.) To ensure you get the maximum tax savings you are eligible for, you can get a free 30-minute consultation at an H&R Block near you to ask any tax-related questions you may have. Or, you can complete your taxes online at home using H&R Block tax prep software that automatically identifies all the tax savings you are eligible for, and it guarantees you’ll get the maximum refund.

The Earned Income Credit can be worth up to $5,666 off your taxes

The Earned Income Credit (EIC) is a valuable credit for lower-income taxpayers who work. It provides a tax credit for one child of up to $3,050 and a maximum of $5,666 for three or more children. This Earned Income Credit Table for 2010 can help you determine how much you take off your taxes. The EIC reduces the amount of tax you owe and may also give you a refund—it can mean money back to you even if you $0 in taxes!

Dependent Child Exemption

The $3,650 qualifying child exemption allows taxpayers to claim a dependent exemption for their child, stepchild, adopted child, eligible foster child, sibling or stepsibling, or a descendant of one of these. Children must be under age 19 or under age 24 and a full-time student, and younger than the taxpayer, live with the taxpayer for more than half the year; and not provide more than 50% of their own support for the year.

Child and Dependent Care Credit

The tax credit for child and dependent care expenses allows taxpayers to claim a credit for expenses paid for the care of children under age 13.There is a limit to the amount of qualifying expenses. The credit can be up to 35% of your qualifying expenses, depending upon your adjusted gross income.

Think you may have missed out on tax credits in past years? H&R Block will review your tax 2007-2010 tax returns to see if you should get money back. This is free at any H&R Block office through March 31^st.

She’s also given us FREE copies of H&R Block Federal Premium Edition!  It’s tax season time and who wouldn’t want something premium for free We’re giving away FOUR copies. To enter – Comment, Like, & Tweet this article!  The winners will be announced on Sunday, Feb. 20th.

How you file can mean tax savings in your pocket.

Marriage means compromise. It means negotiation. It means having to decide a million things as a couple: where to live, when to have kids, how to juggle the holidays between all the in-laws.

Your status on the last day of the year determines your filing status for the entire year. If you’re married, you and your spouse can choose to file a joint return or file separate returns. Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns) to determine which filing status is best for you.

Most taxpayers claim the standard deduction — a fixed amount that reduces the income on which you are taxed. Here are the standard deduction amounts according to filing status.

• Single or Married Filing Separately: $5,700
• Married Filing Jointly or Qualifying Widow(er): $11,400

Married Filing Jointly

You can choose Married Filing Jointly as your filing status if you’re married and both you and your spouse agree to file a joint return. With a joint return:

• You report your combined income and deduct your combined allowable expenses.
• Your tax may be lower than your combined tax for the other filing statuses.
• You may qualify for tax benefits that would not apply if you filed separately.

Married Filing Separately

This filing status may benefit you if you want to be responsible only for your tax or if it results in less combined tax than filing a joint return. With separate returns:

• You generally report only your own income, exemptions, credits and deductions on your individual return.
• You can claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person.

You may become ineligible for tax credits and deductions you received in the past.

Because of your newly combined income, you may lose benefits (such as the Earned Income Credit and the Child Tax Credit), you were able to claim before you were married, especially if you filed as Head of Household before the marriage. Remember, tax credit is a valuable, dollar-for-dollar reduction of the tax This Earned Income Credit Table for 2010 can help you determine how much you can receive in these child-related tax credits.. Using the Child Tax Credit Table you can see if you are eligible for the full credit amount of $1,000 per child based on your income and filing status.

Compare taxes when filing separately versus jointly.

You will generally pay more combined tax on separate returns than you would on a joint return because you are not able to claim as many credits and deductions. This quick and easy tax refund estimate calculator is one way to see the affect of how you choose to file.

You can do your taxes at home with H&R Block’s online tax prep software that because it identifies all deductions and credits you are entitled to and guarantees accuracy and the maximum refund. Through March 31, H&R Block will take a second look at your tax returns from the past three years to see if there is tax refund money you missed—for free, no matter who prepared your taxes.

If you are still unsure about how to file, take your latest pay stubs along with last-year’s tax returns to a tax professional to have a pro forma joint return prepared. Be sure to let the tax pro know about any items that will be different. For example, if neither of you owned a home and you are buying one, the tax pro will take the interest and taxes you expect to pay into account.

If the pro forma joint return results in a balance due and this is unsatisfactory to you, you can increase your withholding by filing new Forms W-4 or by making estimated tax payments to cover the expected balance due. You can always get a free 30-minute consultation with a tax pro at an H&R Block office near you, and determine what’s best for your situation.

In case you’re wondering, that’s $49.95 value! They’ve even gone ahead and bumped up the certificate to $55 to cover sales tax as well.  What nice guys huh?

Entry will be based on either social media or website interaction.  If you use Twitter & Facebook, tweet or like another article from the site that you like.  If you don’t use these, then subscribe for the email newsletter and write a comment on another article.

The winner will be announced on Tuesday, February 8th.

Winners have been notified & provided their codes.  Don’t worry!  There’s still more to offer.  

Most people know of H&R Block, especially with those new commercials they’re running.  If you need a refresher, they put together a nice slide show of their services.

From their website, there’s a few new features they thought you should know about:

• H&R Block At Home offers free expert advice from our community of tax specialists. Users can rest easy knowing the tax experts at H&R Block are available to support them along the way.
• Unlike other digital tax preparation services, all H&R Block At Home products include free audit support with one-on-one guidance and representation from an H&R Block enrolled agent.
• Faster set-up and better navigation make H&R Block At Home even simpler to use. A streamlined process and clear language make it easier for users to understand.
• Last year’s return is easier to upload with enhanced import tools. H&R Block At Home’s partnership with Yodlee means users can automatically populate their returns with information from financial accounts.

So that’s it!  Don’t forget to tweet and/or like a DIFFERENT article from the site for your entries.  And don’t worry if you’re not one of the winners.  Plenty of versions are offered to assist whatever your needs are.  There are even free versions available for basic tax solutions.  See below for more details.

According to AAA, the Sticker Price (MSRP) is marked up by an average of 13.5% from what the dealer actually paid for the vehicle.

What scares us about car negotiations? Our preconceived notions of “not getting a good deal” or being subjected to “slimy dealer tactics”? Could it be how infrequently we make large purchases and the costs associated with them? With double-digit markups, it seems like new car buyers would be more more diligent in their research and more aggressive with their negotiations.

Mrs. FinEngr and I first started talking about the idea of a new car back in August of 2009. Not really entering the market until early September of 2010, we worked with Geoff, the Car Negotiation Coach, on strategies to secure the best possible price.

New Year’s Eve Day, we purchased a 2011 Hyundai Sonata.

Based on checked and re-checked calculations we negotiated:

• 19% below MSRP, over $3,000
• 14% below Factory Invoice, over $2,000
• 3.5% below Dealer Cost (averaged*)

*It’s hard for me to believe the dealer actually took a loss on our sale. At a minimum I know they got very little to no profit off us. Different sources and price profiles came back with savings from 0.5% to 6.0% under Dealer Cost.

As for the back story, here’s our situation…

Mrs. FinEngr has been on a car-free diet for the past 4 years. She’s relied on public transportation and her own feet to get around town. An added bonus – her transportation costs $0 since her employer subsidizes mass transit services.

I’ve been driving the same used car for 11 years now. The Red Rocket has over 120,000 miles, but will be kept until its run into the ground. I’m hoping for another 10 years, but Mrs. FinEngr isn’t as enthusiastic as I am. Whatever the future holds, we ultimately plan on maintaining a 1 car household for as long as we remain in the Washington, DC area.

The Decision of What & When to Buy

New vs. Used

Never thought I’d pegged myself as a new car buyer, always felt I’ve live and die by the used car mantra. After the excess of new vehicles following the economic downturn, I changed my tune. Sales have steadily increased since then, but there’s still a surplus on dealers’ lots.  Since we’d been planning for so long, we’d been stockpiling cash so as to avoid using instant loans online and online cash loans.

Considering used vehicles for some time, the market lacked a comparable inventory to the new models. Looking at dealers within our immediate area, we found over 500 new vehicles in stock of the exact same model; the used options barely reached 100 and included different models.

Finding Value

Part of the decision to buy new came from the specific vehicle we were considering. We ended up selecting the Sonata for a variety of reasons. Other makes still held true to their “base” model name, but the Sonata was a major upgrade. The standard features offered in the base model simply blew us away.

Considering our buy & hold approach with vehicles, the warranties offered were top of class and will hopefully reduce our total ownership cost over time. Gas mileage was a concern of mine and safety ratings was a big one for Mrs. FinEngr – the Sonata met both these requests.

When to Buy

We opted for the trifecta of timing – end of month, end of quarter, and end of year. Scheduling our negotiations for the last week of the year, we guaranteed dealers a sale on December 31, 2010 hoping to capitalize on their incentives to meet various quotas.

As Geoff stresses, the best time to buy is end of the month. And AAA confirms: “Sales managers like to build campaigns around monthly sales quotas. Bonuses are set up to reward salespeople who meet or exceed sales quotas per month.”

Ever notice the increase in car ads during the Christmas season? “Experts say the best times of the year to buy a car are during the last two weeks of December… Car lots are often nearly deserted during the busy holidays. The slowdown motivates dealers to cut costs.” After some more research, it turns out December can be one of the lowest months for total sales.

Research & Negotiation

Check Your Sources

My #1 suggestion? Never use a singular source! With tons of websites offering advice, you should always cross reference the validity of the material against other sources. But for your convenience, here’s a breakdown of the usefulness levels.

MUST USE

• Aggressive Consumer Advocacy Sites. Independent sites offer the most raw information. Nothing sugar-coated, they arm you with everything needed to take on the dealers. The best ones used for our own car search included:
  • Find the Best Car Price (Outline Negotiation with Templates)
  • Autobuyology (Start to Finish Breakdown)
  • Car Buying Tips (7 Chapters of Information)
  • Fighting Chance (Detailed Pricing Reports)
• Auto Clubs & Enthusiast Forums. Once you know what model you’re looking at, check out any regional or national clubs or forums. Some people are just nuts about their cars and willing to bare all to other enthusiasts. Find out about long-term performance, maintenance hangups, actual negotiated costs, expected level of service, and so on.

SHOULD USE

• Auto-Affiliated Services. Sites like TrueCar have emerged providing consumers with specific data based on actual sales. However, the reported figures are sometimes estimated (if you read the fine print) and may not reflect the absolute market data. I also noticed discrepancies between reported figures between the sites, so the reliability comes into question.
• Consumer Advocacy Organizations. Consumer Reports and AAA have been in the game for a long time and are reliable sources. Most of the best information is offered at cost though and there are limited free services available.

DON’T USE

• Believe it or not, all the major financial websites I scanned gave fairly useless advice. If you are just learning what a car is for the first time, start with these “top 10 tips” and work your way up through the levels.

Know the Cost Breakdown

Needless to say, you should never negotiate a new car off the Factory Invoice let along the MSRP. Don’t be fooled into looking at the base quote either as that may only capture 80% of the vehicle’s “final” cost.

Edmunds provides a decent listing of the various other costs tied into purchases like: Dealer Holdback, Incentives, and Document Fees. Each site differs in what they consider “reasonable” charges, but they all agree most of these line items are negotiable.

Review each of the proposals to ensure no additional dealer fees are included. As far as I see it, these are markups on the markups. And avoid extras at all costs. Whatever the dealer offers can be gotten for cheaper directly from the third party. These are all ways for dealers to reclaim profit from whatever “deals” they offer you initially.

Start a Bidding War

For the actual purchasing, we utilized the Email Price Reduction process outlined by Geoff. Instead of reviewing it here, feel free to browse his site. We followed the process for the most part with a few minor tweaks of my own.

The entire ordeal took less than 1 week. Dealers began dropping like flies after only the 2^nd round of emails. Even after the best offer, I still went back and asked if they could shave more off. They didn’t, but we did get a few extra accessories for no added cost. At the dealership we never discussed costs except to review the agreed-to pricing. There was no haggling or surprise changes – it was a presentation and signature of the paperwork followed by us driving off the lot.

Strip Away Emotions

First things first – you are NEVER stealing from a dealer. Ingrain this into your brain. If anything you are the bank, the dealer is the robber, and your negotiations are the safeguard to your vault.

Once dealers recognize they are losing your business, they can resort to some interesting tactics. I was surprised with how desperate the emails became when this happened. They referred to themselves as my “honest neighbor” or “humble servant”, offered a list of intangible (read: no monetary) benefits, and some became quite blunt. I was told the other dealers were lying to me and I shouldn’t be wasting their time. Seriously?

You must recognize you are buying a commodity, and there is nothing special about any specific vehicle at any particular dealer. Since vehicles are a relatively fixed cost, profitability becomes a function of how well dealerships can work off your emotions.

Unfortunately, many people fall victim at this point. Don’t. Somehow dealerships make themselves whole, so don’t feel guilted into giving them any more money than absolutely necessary. If they start complaining about their commission or manufacturer fees this is nothing more than panhandling and not your problem.

Remain Diligent

There’s a tendency for complacency to kick in once a deal is struck. There’s this wave of relief after all the effort to negotiate that we forget there’s still more work to be done. Until the deal has been finalized with your signature, you should remain mentality alert.

During the sales contract review, we caught a $20 clerical error because of our diligence. Constantly working the numbers forwards and backwards to make sure everything lined up, we noticed that one print-out differed from one we just discussed. It may seem minor, but we actually saved ourselves more than the $20 since taxes are a percentage of the overall total.

Happily Ever After

And there you have it. We are extremely happy with our purchase and loving our new car. Considering everything in the Red Rocket is manual, the Blue Bomber (tentative new name in honor of my fighter-pilot grandfather) has been a real lap of luxury.

Geoff recently posted my comments to his own site. When it’s all said and done, the satisfaction with your purchase has a lot to do with the actual purchasing process. I’ve been going through the numbers many times to see if we really got the “best deal” and was convinced we did well after scanning the used listings. Turns out – we couldn’t buy the same model for the same price without a ton of miles on it!