Three years ago my goals were to repay old debt and build a small amount of savings. Today my goals are to buy a house, save for retirement, and build bootstrap | economist into a viable business.

My efforts to turn bootstrap economist into a viable business have been disappointing. I won’t make any excuses, it is 100% attributed to my intermitted writing spurts. When I started bootstrap economist, I was in a dead-end job with plenty of free time. I had grandiose dreams of building a personal finance powerhouse, but they were dashed by several name changes and too much off topic content. But I wrote dilligently until my responsibilities grew and my availability for blogging dropped dramatically. Therefore, bootstrap economist sat collecting virtual dust in a dark corner of the internet for the past year.

Due to the aforementioned, I’ve decided to wrap up bootstrap economist for good. I have been weighing the decision for some time — looking for a clean slate. A new idea untouched by the web’s copycats. A project whose blatent simplicity will have webophiles smacking their heads in frustration for not thinking of it first. One lesson learned from bootstrap economist, is the importance of knowing your customer. And my next project will be built to keep customers coming back day after day. I have a number of ideas and a good network of friends to help me execute them, but won’t act without having a solid plan in place.

But before I sign off one last time, I’d like to take a moment to talk about an upcoming conference whose ideology is on point with my future endeavors. The Audience Conference is a uniquie affair hosted by Loren Feldman of 1938media. For those unfamiliar, Loren Feldman is a videographer who speaks frankly about the web. His Audience Conference is different because its format forgoes dreadful amateur panels in favor of candid conversations with social media savvy business leaders. The Audience Conference features an impressive list of speakers covering journalism, advertising, marketing, public relations, web-based business and the arts. (See below for a video of Feldman explaining The Audience Conference in his own words). In my humble opinion, the caliber of participants mixed with an intimate setting will make this an unforgettable event. I am unable to attend, but it would have been an excellent opportunity to bend Jason Calacanis’ ear about Mahalo and continue a previous discussion with Loren about video production.

I will keep bootstrap economist online for the occasional websurfer that finds my older content helpful. However; I will no longer be adding new content. Thank you again for all of your support.

- bootstrap economist

I spent my first week getting settled in my new home; furnishing my room, bonding with my new roommates and acquiring my first car in four years. Once all the necessities were taken care of, it was time to hit the street and meet people. I started with the network closest to home, my roommates. One was new to the area in a mildly better situation than myself, but the other had lived in the area for nearly four years. Within the first few weeks the latter and I went out a handful of times to local hotspots. Seeing West Palm Beach with her was helpful but being out with a platonic female acquaintence doesn’t provide the best results. I needed a wingman.

When searching for a wingman it’s important to find a friend who compliments your style and won’t compete with you. Enter Mike, an acquaitence of mine from college whom I had lost touch with several years ago. When I was traveling to Florida on a temporary basis, I reached out to him on Facebook to reconnect. And paramount to the values of the fraternity we were members of in college, he ungrudgingly invited me to dinner with his girlfriend and offered to show me around. What’s important to note about Mike is that he is a forthright individual providing unintimidated conversations with any audience willing to listen. As an example, Mike ran into former Miami Dolphins quarterback Dan Marino at a local Apple store. After engaging in a superficial conversation about non-football topics for a few minutes he asks Marino if he really uses NutriSystem, the weight loss system he endorses. Quickly the conversation turned from friendly banter to a cold shoulder. Like I said, he’s blunt. Mike’s style is a direct contrast to my calm and collected demeanor, a style I developed dealing with customers at work. Experience taught me that being friendly and empathetic with a side of humility exponentially improves business relationships. Where Mike will incite riots, I act as a neutralizer keeping the peace. Instantly, Mike and I became a dynamic duo in social situations. His at-times callous comments break the ice to strangers and my modesty keeps the conversations going. Add that Mike is happily attached to a tolerant girlfriend, he makes the perfect wingman.

To paint a picture, I will go back a few weeks to one of our first tests. Enjoying a guys night out at Roxy’s Pub in West Palm Beach, Mike and I were watching opening night of the NFL where the Pittsburgh Steelers were playing the Tennessee Titans. A raucous woman — lets call her Amy, clearly made her allegiance to the Steelers known interrupting our conversation. Mike is a fan of the Baltimore Ravens, a division rival to the Steelers, and voiced his displeasure over Amy’s cheering. “Do you want to go?” Amy retorts in Mike’s direction and I respond that she should be careful what she asks for. Mike and I return to our beverages, chicken wings and conversation when we soon notice someone looming behind our stools. We turn around and Amy has walked over to us demanding an explanation over our displeasure with her beloved Pittsburgh Steelers. After several jibs over which team will win the AFC North, I steer the conversation away from Football. We share laughs over flirtatious teasing and we learn a bit about Amy. She is a flight attendant holed over in Florida for the night, her best friend recently engaged in coitus with her brother and me not requiring a seatbelt extension on an airplane was worth big points to her. We also learned she enjoys chicken wings and had terrible hand-eye coordination. Unfortunately, the night ended without a successful exit as her first officer scooped her up despite her pleas to stay. But there are plenty of nights like this one in our future.

Aside from meeting flight attendants in bars, a good wingman helps build real friendships. Mike has introduced me to his friends which has helped build a decent social network in a short amount of time. Informal dinner parties, nights out and other assorted explorations are all paramount to a healthy personal life. When I reflect back on my first day here, it’s hard to believe I ever had a doubt.

With my blatently transparent plea out of the way, I considered bombarding you with e-mails, tweets and phone calls. However, mine would barely distinguish themselves from the herd of messages aimed in your direction on any given day producing a limited return on my efforts. Instead, I am telling Mahalo’s story in two parts: objectively with information I’ve compiled from TechCrunch (60%), various tech blogs (30%) and other websites (10%); and skewed based on a conversation with yourself. In addition, I am not trying to linkbait - a simple DM to my twitter account (@economist) would be appreciated to start a dialogue.

And now, on to the featured presentation.

Textbook entrepreneurs love their companies, spending countless hours creating their respective enterprises. This dedication transcends their respective industries whether it be service; retailing; wholesaling; or manufacturing. Every entrepreneur has a story that they will share with any audience willing to listen. Some are grandiose tales of unbridled success leaving dead-end jobs to follow lifelong dreams and others are deeply rooted stories about generational family businesses. Most of the entrepreneurs I have spoken with began with a modest amount of capital financed by personal savings, family members and/or friends. They became successful by working hard and building equity in their original investment.

When I joined quirky mircomessaging twitter in April 2007, it was mostly filled with technology geeks, internet lovers and idealistic entrepreneurs. This created a nerd utopia enjoyable to watch, but the overt idealism became tiresome to a cynical corporate ladder climber such as myself. Most people in my position would quickly lose interest and return to their Facebook-powered safehouse, but I stuck around. Twitter in 2007 provided an intimate network to mingle with industry leaders and learn the technology industry free of charge.

Technology entrepreneurs share similar qualities to those I have previously come across, with one staggering difference. Technology companies are historically funded through venture capital and private equity firms, selling pieces of their company for an immediate influx of cash. This capital allows technology startups to quickly build an infrastructure for their creations and prove their worth in a dog-eat-dog industry. But an unfortunate side effect to this model are boisterous sales pitches bloated with egocentric conjecture.

When I first read about Mahalo, I assumed Jason McCabe Calacanis was a par-for-the-course technology entrepreneur. He confidently touted Mahalo as a human powered search engine but remained vague as to what the classification meant. However; I completed my due diligence and discovered Calacanis was a veteran in the technology entrepreneurship space experiencing mixed results. His first company, Sillicon Alley Reporter, was a glossy magazine focusing on internet technology in New York. But Sillicon Alley Reporter folded due to a lack of advertising revenue, and was repackaged as Venture Reporter and slowly disappeared. Calcanis’ second company was blogging network Weblogs, Inc, co-founded with Brian Alvey in September 2003. Providing financing for the company was Dallas Maverick’s owner Mark Cuban. Weblogs, Inc. grew to approximately 90 weblogs before its sale to AOL n November 2005 for a conservatively estimated $25 million. Through acquisition, Calacanis joined AOL and became General Manager of Netscape shortly thereafter. Calacanis stuck with AOL until then-CEO Jonathan Miller’s departure. Per TechCrunch, Miller was “one of the few mentors [Calacanis'] had in [his] life”. Shortly after his departure, Calacanis became an Entrepreneur-In-Action at Sequioa Capital. This chain of events and those involved lead to the founding of Mahalo, but I will touch on that shortly.

At inception, Mahalo was a modest directory of hand-curated search results supplemented with Google to backfill common search needs. Mahalo drew striking similarities to web portals already existing at AOL and Yahoo, which feature landing pages rich with daily news updates and home grown content. Further reading was supplied by Google and an outdated proprietary search engine at AOL and Yahoo respectively. Technology journalists were critical of Mahalo citing the company as a poor implementation of decade-old technology. To be honest, Mahalo was a distant cry from the human powered version of Google those same experts thought Mahalo should be. Calacanis stood his ground against skeptics and maintained that Mahalo would be successful. Since search is not my expertise, I didn’t care whether Mahalo is groundbreaking or a carbon copy of outdated websites. What intrigued me were evident similarities between Mahalo and a product Calacanis’ was developing while General Manager of Netscape.

Below are quotes from Michael Arrington as made on his technology blog TechCrunch.

AOL-Netscape Launches Massive “Digg Killer”

It’s not exactly a Digg clone (home page screenshot here). Submitted stories are voted on in much the same way, and the more votes a story gets the higher it appears in a category home page or on Netscape.com itself. However, the top few spots in each category and on the home page are determined by an “anchor” - essentially an editor choosing from stories moving up the ranks.

There are 30 topical channels, from “Art & Design” to “Women”. Eight full time and eleven part time editors will manage the site, determining both the top stories as well as staffing a 24×7 chat room where users can discuss stories in real time.
June 14, 2006

Jason Calacanis Launches Mahalo Today: Human Powered Search

The service has features that are similar to the new Netscape news finder product that Calacanis launched last year at AOL: expert guides will determine the most relevant results. The main search results are provided by guides (Mahalo employees), who find relevant results for search terms. User submitted results are also included.

The primary results for search terms are included at the top, in a “top seven” area. These are hand picked results from the guids that should all be good results for the query (see screen shot below of results for “Paris Hotels” - click for larger view). To the right of the results are “Guide Notes” which include additional information including relevant additional searches and “Fast Facts.” In the case of Paris Hotels, the “Fast Facts” include the country, language, currenty and telephone country code.
May 30, 2007

While these similarities could be viewed with ill-intentions, it is a matter of AOL going in a different direction under new management and Calacanis taking the opportunity to launch his startup in the aftermath. Prior to Calacanis becoming General Manager of Netscape, it was a mainstream news portal with 500 to 800 million monthly page views. With that amount of traffic, reinventing Netscape was a large risk for AOL. On one hand, AOL knew how much advertising revenue it could generate from Netscape in its existing form. But decision makers saw trend(s) that justified handing the keys over to Calacanis for an overhaul. In hindsight, traffic dropped off (it’s important to read the comments), users revolted and Netscape was restored to its old form after Calacanis left. An AOL executive cited the reason as users expecting to find a traditional news portal on the Netscape domain. The Digg clone that Calacanis created was to be moved but was not heard from again.

With Calacanis gone from AOL and his digg clone buried, a door opened for Mahalo to take its spot. It has been my experience that previous success; which Calacanis achieved with Weblogs, Inc, provides investors with confidence to fund additional business ventures. Despite the questional business decision of where AOL let Calacanis launch his Digg clone, the reasoning behind it could be justified. It was a web 2.0 play for everyday internet users well before soccer moms and elementary school principals turned Facebook mainstream. And Calacanis had an impressive group of financiers to get Mahalo off the ground. They include Sequoia Capital, Mark Cuban, Ted Leonsis, Jonathan Miller, and several media companies. For those unfamiliar:

• Sequoia Capital is a well-known venture capital formed by Donald Valentine. Sequoia Capital invests among a wide range of technologies including software, computer systems and semiconductors. Notable companies receiving capital from Sequoia include Apple, Google, Oracle, PayPal and YouTube.
• Mark Cuban is the founder of Broadcast.com (which Yahoo bought for $4.6 billion), HDNet, and owner of the Dallas Mavericks. Cuban is an angel investor for several startups.
• Ted Leonsis is vice chairman emeritus of AOL, joining through acquisition of his marketing company Redgate Communications Corp. in 1993. Prior to his retirement in 2006, Leonsis held several positions within AOL including Audience Groups President.
• Jonathan Miller also worked at AOL, serving as Chairman and CEO from 2002 to 2006. He was brought in to restructure the company’s core business lines, choosing an online advertising focus. Through his leadership, AOL delivered record annual profit growth and increased its online advertising. Calacanis counts Miller among his few business mentors.

In summary, Mahalo was funded by the venture capital firm housing him after he left AOL; an investor in Weblogs, Inc. who received a successful exit; and two former AOL executives who were likely involved in the decision to purchase Weblogs, Inc. and put Calacanis in charge of Netscape. IMHO, this demonstrates a vote of confidence in Calacanis and his ability to build Mahalo into what his Netscape revitalization never became. Total funding for Mahalo was approximately $21 million (although I can only confirm $16 million from one non-descript article), and was expected to last four to five years.

Since its inception over two years ago, Mahalo has evolved the term “human powered search” into a multifaceted community site that pays its members for their efforts. In a nutshell, Mahalo encourages participation in return for advertising revenue share and contributions from members willing to pay for the expertise of other members. Per the site itself,

Mahalo is a human powered search engine, all information you find on Mahalo is all created and/or curated by the members of the Mahalo Community in exchange for Mahalo Dollars. There are three main money making components to Mahalo, each is relatively unique and users can participate at their own leisure in each area. Here are the three main Mahalo answers you will need to become familiar with.

1. Mahalo Answers: This is the main community hub, users use this to ask and answer questions about Mahalo and anything else that comes to mind. There are daily contests and active users earn dollars by providing the best answer to questions. Here is a list of the top earners within Mahalo Answers.
2. Page Management: Search results on Mahalo are built and and managed by Mahalo community members. Mahalo compensates the manage with 50% of the advertising revenue. Here is a list of the top earners since the program begin in June 2009.
3. Mahalo Tasks: These are small pieces of writing work that Mahalo editors need completed, Mahalo members can claim the task, then get paid for it’s completion. There are often contests centered around Tasks as well. There is no leaderboard for this yet, but some say it’s the most lucrative attraction for those looking to earn dollars.

To demonstrate how Mahalo works, I have used a recent story on Michael Jackson and you’re brought to a wiki-styled article. Everything is connected with click throughs to Michael Jackson’s personal page, ADD-inspired bullet points for the story, links to traditional news stories and questions about the story served by Mahalo’s Answers product. And the mix of creators and consumers has translated to nearly 10 million unique visitors in August. I started bootstrap | economist two and a half years ago while I was transitioning jobs in my professional career. I had every intent on building the site into a megasite for banking news and opinion, but scarce updates and no marketing has left bootstrap | economist a vapid wasteland. In August, I had 85 visitors which is 1 for every 111,000 visitors to Mahalo.

In my humble opinion, this formula has turned Mahalo into a news and entertainment portal with a delicate human touch. Although the site generates modest revenue today, an advertising partnership with Microsoft or Google would put Mahalo on track to pay dividends to its investors and stakeholders. In Part II I will discuss how advertising revenue will expose the latter half of Mahalo’s business model, who potential acqusitors are and how I anticipate Mahalo’s products would fit into their plans.

When I dropped in Philadelphia nine years ago I was a terrified teenager fresh off the ills that plague many teenagers in this country. Prey to a messy divorce, I was bubbling with uncertainty that threw my uncanny gift of understanding people into a tizzy. Unwilling to let her and my father’s problems derail me, my mom sent me north to spend the summer prior to my freshman year in college with her sister. My life immediately became a suburban middle class version of The Fresh Prince of Bel Air sans mansions, country clubs, and a witty butler. Like Will Smith in his perpetually syndicated sitcom, my personality clashed with the family members who generously took me into their home, gave me an opportunity to earn money for college, and made sure I was fed three square meals a day. But unbeknownst to me that summer instilled a framework of humility, hard work, kindness, and empathy that would ultimately lead me to my current path.

My first five years passed quickly as I earned my right of passage at one of Philadelphia’s fine education establishments. (My program was intended to be five years). I spent my time socializing with new friends and exploiting the benefits of an urban campus, and studying when the opportunity presented itself. The next four years also flew by for different reasons. Unhealthy spending habits in college kept me in Philadelphia somewhat unwillingly but recovering gave me tremendous insight into personal finance and left me with a strong sense of personal responsibility.

During my career, I have had a number of different opportunities but passed because I was immobilized by choices I had made in the past. When repaying debt every opportunity must be weighed against the pivotal question in the back of your mind: if it falls apart, will my progress stagnate or be erased? Stuck in a glass ceilinged company two and a half years ago, I explored moving to New York City. My decision against the move was attributed to high costs of living. My progress would undoubtedly be negated by doubled rent and higher taxes. I passed and the economic fall-out six months later eliminated most of the opportunities I had considered. Eventually I landed a position in Philadelphia with a larger company offering growth potential.

Year nine in Philadelphia was one of the best because I was no longer hampered by past mistakes which allowed me to finally experience life as I should have three years prior. Free from tough choices such as going out versus eating for the week, I was able to expand my social circle and was much more pleasurable to be around. I was also poised to continue enjoying life when those around me were cutting back due to uncertain economic conditions. It helped to have a stable job that offered me the convenience of living without the expense of owning a vehicle and a small reserve fund attributed to good spending habits learned from my debt repayment. But I wanted an opportunity to elevate my career further which appeared grim in the City I loved.

For those unfamiliar with Corporate America, it can be a cold and lonely place if you are unwilling to take risks. But the risks are different than those taken by entrepreneurs because they have to be controlled. Being direct with upper management about your position on company policies and processes can lead to a long vacation without pay so your intelligence must be explained with finese. For me, I did my work faster and more thorough than those around me, using my free time to take on additional projects and find mentors within my office. Taking on additional responsibilities is welcomed but only if you complete the task well. Otherwise you develop a reputation of a hard worker who is unlikely to move through the ranks. Having mentors who understand the dynamics of the company puts you in touch with managers you are unlikely to have met otherwise. But above all else, it is important to have a manager that recognizes your atributes and highlights them to their managers.

Eventually, the opportunity I wanted came knocking. A specialized team in West Palm Beach, FL sought temporary help for a few weeks to complete “mission critical” tasks for the Company. My manager approached me with the possibility of spending a few weeks in February supporting this team and I excitedly aggred to help. My work ethic and hunger to succeed impressed the team leader and I was kept on the project for several months. Once my time on the project ended, I returned to Philadelphia energized by the experience. A few weeks later, I was offered a full time position. Despite the benefits of a challenging job in a growth market, it was a difficult choice to permanently leave my friends, family, and job in Philadelphia for an unknown situation. But I was now free from credit card debt and Florida has a favorable income tax structure which made me comfortable with my decision. And my family was supportive which weighed heavily as well.

Now I am braving the heat and afternoon typhoons typical of summers in South Florida, ready to take on the challenges that lie ahead. I wouldn’t have it any other way.

Translated into English, a little bit of credit acts as a catalyst for women outside the labor market, turning them into economically productive individuals. Once they become economically productive, they can pay back small loans. But they’re not productive enough to pay back medium-sized loans.

To put it another way, the interest on a microloan isn’t really return on capital, it’s return on labor. It’s just that without a tiny bit of capital, the labor is nascent and can’t be tapped. That’s why microcredit works, and why larger loans are much less popular.
- Why microfinance works, economics notwithstanding

Despite relative success worldwide, microcredit has not seeded itself in American culture. Proceeds of microcredit loans are typically used to acquire raw materials for an intial batch of finished goods or tools required to perform a service. In order for this model to work in the United States, borrowers would need to be living below the poverty level and have no access to credit. In other words, Borrowers must feel a sense of urgency to repay these loans. But typical microcredit lenders in America are providing loans in excess of $10,000 to borrowers with bad credit. Having had access to credit in the past, typical American microcredit borrowers do not feel that sense of urgency.

Before leaving Philadelphia, I asked a trusted business advisor why the Grameen Bank model isn’t widely used in the United States. It was his opinion that high costs associated with forming a business lead to a slow absorbtion rate. This provides a barrier to entry that prohibits would-be entrepreneurs from selling their handmade goods or providing their services. Undeterred, I’ve been evaluating solutions since that conversation.

Tonight I had a sudden moment of insignt on the subject stemming from an innocuos conversation about my new home in South Florida. Chatting with my roommate, we explored the similarities and differences of the area to our respective home towns. As both of us are from up north, the promise of endless summers is the most notable difference and our mutual draw to the area. We continued our discussion and I noticed the absence of squirrels and pigeons. I spent the first 27 years of my life in the northeast corridor, and cannot recount a day when I didn’t see at least one of the aforementioned animals in my daily routine. But in my brief time here my mind has been preoccupied with the process of moving and I failed to notice their absense. And it hit me. What if the barriers to entry of starting a business in the United States were removed?

In my opinion, a microcredit organization could be formed by relying on two distinctly different funding sources. First would be grants used to pay the upfront monetary expense and clerical cost of forming a business. It is reasonable to expect Borrowers below the poverty line are unable to read or write, and would be unable to form a business on their own accord. If a microcredit organization provided a legal business shell as a service for its customers, this could potentially make loans under $250 a viable form of credit in the United States. The second funding source would be fees and interest on the loans themselves. Loans would originally be funded by private investment, and the proceeds would be reinvested in the company to build equity, provide capital for additional loans, and eventually reduce reliance on outside funding.

Although effective APRs on the loans would be higher than traditional funding sources, they would fall far below the predatory APRs of payday loans.

For the first eight months that I owned the phone I had no problems outside the nuances that plague every piece of technology on this planet. But in April, I started to notice regular problems with my Curve including the phone becoming slower, large wait times when using e-mail and messaging features, and delayed key responses. In addition, newer applications arriving for BlackBerry devices provided error messages stating they could not run on my Curve. After speaking with friends who also own BlackBerry’s, I was told a software update would fix most if not all of the issues I was seeing. Being technologically inclined this is a simple process — unless you own a Mac. After scouring BlackBerry’s website for the updated system software I discovered I needed BlackBerry Desktop Software which is only available for Windows operating systems. Perturbed, I went to my local AT&T store to have the software updated by the support representatives. When I arrived I was told only an authorized AT&T support center could update the software, the nearest of which was almost an hour drive from where I was staying in West Palm Beach. I was frustrated by the circumstances caused by a perfect storm of cross-platform incompatibility and AT&T not having the proper infrastructure to assist all of its customers.

I called customer service, explained the situation, and asked for early eligibility to switch to an iPhone which was naturally compatible with my MacBook. After about 30 minutes on the phone, a note was placed on my account that provided me with early eligibility. Set to upgrade to the iPhone that day, many of my friends on Twitter encouraged me to wait for the unannounced-yet-expected iPhone hardware and software upgrade in June. Knowing I would be disappointed if I upgraded to an iPhone only to have it made obsolete two months later, I decided to wait.

On Friday I went to my local AT&T store to upgrade now that the iPhone 3GS hype has dissipated. The helpful customer service representative saw the note on my account from earlier and allowed me to order a Black iPhone 3GS. Since my elgibility date in the computer was January 2010 she said an early upgrade form was required which would potentially take two to three days. Understanding of the situation I left after ordering the phone. This morning I received a call that I was unable to upgrade to the iPhone, but she would help me upgrade to another phone if I desired. While I would typically be amenable to another phone only the BlackBerry and iPhone offer the levels of e-mail functionality that I need. After allowing the news to sit for a short period of time I called AT&T customer service to see if there was anything they could do. I spent 25 patient minutes on the phone with a customer care representative who kept rehashing the same suggestions I had heard in the past. Use the PocketMac software, go to an AT&T service center, use a Window’s enabled laptop, or switch to a different phone altogether. I finally asked to speak to a manager to see if there was any way for me to switch to an iPhone.

When Steve joined the call I was delighted to know he was a fellow Mac user as well. He was empathetic to my situation but informed me his hands were tied because of the contract that AT&T has with Apple. I inquired about adding a second line of service, selecting the iPhone for that line, and cancelling my existing phone number with a waived cancellation fee. Unfortunately, he was unable to waive the AT&T cancellation fee and it would cost me an additional $10/month until my existing contract expired next July. He offered to upgrade me to a newer BlackBerry but I was conerned that I would be facing the same problems again in the future and it would reset my eligibility to purchase an iPhone. He apologized for being unable to help me out and offered me a $20 service credit for the next three months as a consolation for being inconvenienced by a phone that cannot be upgraded. While not the exact resolution I was hoping for, it makes the six month wait for the iPhone slightly easier to bear.

Prior to signing my lease on Monday I had visited the dealership to test drive the TL and build a rapport with the salesman. I attempted to negotiate a price prior to signing my lease, but the salesman assured me that the dealership would not negotiate until I was ready to consumate a deal. When I returned ready to make a deal I started the negotiation process well below my target lease payment. This is due to the dealership wanting to guage my spending threshold. If I came it at my target payment, I would likely pay more than I wanted to. My initial offer was $400/month with $1,500 down and the dealership came back with $470/month with $2,000 down. After standing firm, they returned with $470/month and $1,500 down.

Frustrated by the process the salesman brought me into the financier’s office to have a chat. When speaking with him I started asking detailed questions about what I was paying on the car. First, I noticed I was paying about $600 over invoice for the car. I demanded to pay invoice for the car and the financier explained I was paying invoice, but there was a $595 bank fee — charged by American Honda Finance Corporation, for their costs. I was then assured that the bank fee I was paying did not include a profit margin for the dealership. The bank fee fit into my threshold of $500 over invoice, but did not explain why I was paying an additional $35/month on my lease.

My next question involved the lease cash from Acura which the dealership listed at $1,000 and I had researched to be $1,505. I questioned this and the financier showed me his price sheet that listed lease cash for my model — the TL without navigation, at $1,000. When I brought up the lease cash being $1,505 on the website they still refused to budge. I was told that their hands were tied on the matter and there was nothing they could do. But that $500 discrepancy should have only added $15/month to the lease payment making my maximum payment $450/month which was $20/month less than my quote. After the negotiation hit a stand-still I left the dealership.

Five minutes later I received a call from the salesman who made a last attempt to earn my business. He told me that the financier would do the deal at $448/month but I would have to return to the dealership immediately to complete the deal. Considering that the monthly payment was within the range that I wanted to pay, I accepted and returned to the dealership.

Overall, the negotiation process took about two hours and I was happy to have received what I felt was a fair deal. I had hoped to pay about $13/month less on the lease but I needed a car immediately and the residual value and money factor was set to change the next day. Ultimately, I decided paying a little more on the lease negated the risk of losing the deal completely due to potentially unfavorable residual vaues and money factors in the next month.

I used to love cars, customizing little tidbits to make them mine. As a teenager I tore apart the dashboard and door panels of my aging Ford Taurus to build the best stereo systems a limited budget could buy. After that car’s untimely death on the backroads of suburban Maryland, I acquired a Ford Contour which quickly gained a new stereo system with kickin’ bass. Throw in money wasted on a pointless exhaust system and an air intake to increase the car’s meager 125 hp engine and I was in heaven. When the transmission on that car gave out, the cost outweighed the value of the rapidly depreciated american car and I traded it in for the Ford Focus. This car too received a music makeover with satellite radio and a tasteful subwoofer install courtesy of my friend Dave.

But as I have aged my view on cars has changed from them being an asset worth monetary investment to a liability of which the cost should be reduced to a minimum. Instead of driving a car until the wheels fall off, I like the flexibility of switching to a new vehicle at a relatively often pace. I would rather spend less on a vehicle; monthly payments, cash at purchase, and maintenance, and accumulate the savings as a downpayment on a house. When making my decision on whether to lease or buy, I contemplated four scenarios. Purchasing a new car, purchasing a slightly used car, purchasing a heavily used car, or leasing a new car.

I immediately ruled out purchasing a new car, because I would owe more on my note than the car was worth as soon as I drove it off the lot. I ruled out purchasing slightly used because without a substantial down payment, my car payments would be high. My friends suggested to put more money down on the car to reduce my monthly payments, but that would be counterintuitive to saving for a house. I ruled out a heavily used car because of high maintenance costs and social pressures to drive a nicer vehicle. Despite downsides including mileage overages (should they occur) and costs to repair wear and tear on the car when it is returned, I felt leasing was the best option for me. It allows me to drive a new car, pay only my cost to use it, and save an extra few hundred dollars per month towards my house.

Leasing a car is a complex financial transaction that goes beyond the monthly payment and cash due at signing typically advertised on manufacturers websites. After reviewing countless websites on automobile leasing, the two most helpful have been LeaseGuide and RIDE with G. On top of refreshing my basic knowledge of leasing, these websites taught me that sales tax laws on leases vary by state, that the sales price of the vehicle should be negotiated before payments are discussed, and why to get a breakout of where cash due at signing goes.

Tax Laws
Understanding tax laws is important, because some dealerships may list the taxes inappropriately. Through my research I learned that the State of Florida taxes the actual lease payment, however certain dealerships attempted to tax me for the entire vehicle and wrap that into the lease payment. The difference could save between $25 to $30 per month on my lease payment.

Sales Price
Like purchasing, the sales price of the vehicle should be negotiated prior to any discussion on your monthly payment. A $2,000 to $3,000 deduction in the sales price, will immediately translate in my favor as a $60 to $90 improvement on my monthly lease payment. In addition, sales price negotiation should exclude any incentives by the manufacturer.

Cash at Signing
There is a difference between inception costs and vehicle price reduction. Inception costs include a first month’s lease payment, dealer fees, DMV fees, tire fees, and other miscellaneous costs. Inception costs should be paid out of pocket, as not to be paying interest on menial fees. However, I learned to double check inception costs because one dealer tried to charge me a $500 premium on a lease acquisition fee charged by the manufacturer. Vehicle price reduction is similar to making a down payment on purchasing a vehicle. But because leasing is a way to rent the vehicle, that down payment will not translate into tangible value. For instance, if the car is totalled in an accident you will not get that money back.

Armed with this knowledge, I am confident I will get the lease payment I want on a new Acura TL.

I am not paying more than $435/mo, all-in on a 2009 Acura TL without the technology package. First dealerhip in South Florida to match this offer, earns my business.