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Old 04-01-2016, 05:05 PM   #1
LJY
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How to hedge exchange rate?

Hi,

Just put down the deposit on a trailer, and started wondering how to lock in the current exchange rate?
I'd like to minimize risk and unexpected negative cash flows... So I was thinking if there's an easy way to buy a CAD futures contract? Or maybe just buy FXC etf? But FXC may cause some possible tax dues if it goes up?
I thought about just giving ETI the money now...but that seems to have its share of risk as well.
Unlike most buyers, I'm not retired yet, but have set aside this "travel money" for my family
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Old 04-01-2016, 05:22 PM   #2
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Just pay it off right now. You get the exchange rate when you pay money. We paid off all but a couple hundred dollars and we don't take delivery till July of this year.
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Old 04-01-2016, 05:45 PM   #3
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If I pay now is it considered ETI's assets? Or I read on another thread it's in an escrow acct which I would be fine with...
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Old 04-01-2016, 05:51 PM   #4
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LJY - I've considered the FXC method and still thinking about it. If the CAD goes down, at least you get to report a loss on taxes to mitigate some of the loss, if it goes up, then when you sell it you make a profit, but as you say then you have to pay capital gains on the profit. Good thing about FXC is you can buy it a little at a time when the CAD is on a down day. But then you also have the cost of whatever you brokerage firm charges per transaction.

My most likely one is to just try to pay it all off with ETI if they still allow that.
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Old 04-01-2016, 05:56 PM   #5
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I paid mine off this last January when the exchange rate was way down. Signed off on the build sheet to. I don't pick it up until October this year.
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Old 04-01-2016, 07:45 PM   #6
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pay off early

Is this $ in an escrow account or is it in Escape's account? We put down our $2500cd this am maybe pay off most of it right away?? what are most of the escapees doing /
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Old 04-01-2016, 09:28 PM   #7
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If I pay now is it considered ETI's assets? Or I read on another thread it's in an escrow acct which I would be fine with...
I can understand the concern of paying for a product and then having a company go out of business. This was my concern as we paid for the whole trailer early, so I did a little vetting on ETI. According to Dun and Bradstreet, ETI has annual revenues which puts them in the top 20% of all trailer manufacturers and their revenue per employee is well above the industry average. This would indicate a very well managed company. This is all public information but a more detailed report can be purchased from Dun and Bradstreet.

Also, I have seen Reace and Tammy provide customer service way above and beyond the call of duty over what was required so I wouldn't worry about a thing as this kind of service provides a strong and loyal customer base. I'm sure your trailer will be ready and waiting for you but probably not soon enough. If a company is overwhelmed with orders, it means they must be doing something right.

The currency markets can fluctuate wildly and if you see an exchange rate you can live with, I would take it. As ETI purchases a lot of their inputs from the US, you can see what a juggling act that Reace has to put up with. Loren
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Old 04-01-2016, 10:21 PM   #8
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Hi Loren,
Thank you for your suggestion and for sharing your research.
Thru my career, I see many other reasons small biz fail..even when they have great sales, great owners and customer service. From what I can see, your reasons are good evidences and that's why I put a deposit down on something I haven't even seen...I've never done that with any other big purchase. But knowing there are other factors, I cannot take that risk unless I know their operations or the risk reward ratio is improved (like a prepaid discount). Sorry, just need to make sure I stay on track on my early retirement plan so I can better enjoy the Escape trailer with my family

Hi thoer,
Yeah, the tax thing would not be good. I have a couple of brokerage accounts where I can trade free. So that's good..

Anyone knows for sure about whether it's an escrow acct?
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Old 04-01-2016, 10:25 PM   #9
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It is not an escrow axcount. I don't blame you; a sound principle in business is to never pay for anything before you have received it. With brokerage accounts you can start trading dollars for loonies now or incrementally as you wish.
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Old 04-01-2016, 11:12 PM   #10
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I called ETI last week to inquire about having a different awning installed on the 2017 models and about paying for the trailer in full at the time we ordered it. There is no option for the awning. I also was told that ETI will not accept payment before the trailer is completed going forward. They suggested I open a Canadian bank account. I assume to exchange US dollars to Canadian at today's rate and hold the account open until you pay for the trailer. I did very minimal research on how to open a Canadian account. It is allowable but I'm fuzzy on the logistics. I think I read you must open an account in person at a bank in Canada. I'll be visiting my daughter at college in Bellingham in a few weeks and will visit ETI and a bank up there to figure it out. I too want to take advantage of the current exchange rate. I'm open to any better methods or ideas on how else to do this!!! Seems there will be lots of us in the same boat!!
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Old 04-01-2016, 11:22 PM   #11
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I also was told that ETI will not accept payment before the trailer is completed going forward.
Now that's new. I guess that's one way to lock in a rate. It's the rate when it's done.
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Old 04-01-2016, 11:32 PM   #12
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Any decent brokerage firm can help you in the US.
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Old 04-01-2016, 11:32 PM   #13
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I also was told that ETI will not accept payment before the trailer is completed going forward.

Boy, that surprises me too. Since 99% of the trailers are custom built to owner specs, I'm surprised they'd wait that long... too many people back out at the last minute and ETI would be stuck. When I bought Ten Forward, ETI preferred final payment within six weeks of completion.
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Old 04-01-2016, 11:35 PM   #14
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Lightbulb

Perhaps there are tax implications for all this cash being thrown at them now.
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Old 04-01-2016, 11:45 PM   #15
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Perhaps there are tax implications for all this cash being thrown at them now.
Hadn't thought about that... these are for trailers being built next year. Maybe the rules will change about full payment on Jan. 1, 2017?
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Old 04-01-2016, 11:47 PM   #16
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Pre-pay becomes a liability for ETI: it's complicated

Quote:
Originally Posted by Donna D. View Post
Boy, that surprises me too. Since 99% of the trailers are custom built to owner specs, I'm surprised they'd wait that long... too many people back out at the last minute and ETI would be stuck. When I bought Ten Forward, ETI preferred final payment within six weeks of completion.
Yes, but what about folks who pay way ahead of time and then have a change of circumstance, and need to get their $$,$$$ back or sell a trailer that hasn't even started production yet? Do they sell their build slot? (That could get weird very quickly.) Wait 'til their trailer is built and then sell it? The problem with just taking a refund is if US/CAN currency exchange is involved, the conversion could mean $$$$ lost. I dunno I can see both sides of the issue...
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Old 04-01-2016, 11:50 PM   #17
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I have a US dollar account at the Credit Union I deal with down the road, can those in the US not open a Canadian dollar account at their local bank or Credit Union and hold the money their until needed?

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Old 04-01-2016, 11:58 PM   #18
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Barry,
most US banks, unlike banks in other developed countries, don't offer specific currency accounts.

Rossue,
I think that would be unearned income.. it'll be great for cash flow and won't usually be taxed unless they are doing cash accounting??

Mark,
Can you see if they can allow Americans to open accts online? or better yet, setup an escrow account for the rest of us!! LOL
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Old 04-02-2016, 12:00 AM   #19
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Yes, but what about folks who pay way ahead of time and then have a change of circumstance, and need to get their $$,$$$ back or sell a trailer that hasn't even started production yet? Do they sell their build slot? (That could get weird very quickly.) Wait 'til their trailer is built and then sell it? The problem with just taking a refund is if US/CAN currency exchange is involved, the conversion could mean $$$$ lost. I dunno I can see both sides of the issue...
That might have already happened as a trailer just recently came up for sale that hadn't been made yet and Reace and Tammy allowed it to be sold to another person prior to completion due to fact that the owner would have lost a bunch of money if he had cancelled because his refund would have been less than the money he had already paid towards the trailer when the exchange rate was more in his favour. This is a bit like the export of the trailers to the US. At one time a US citizen could pick up the trailer in Canada and export it themselves but I think ETI ran into problems proving that the trailer was exported and now they export them to Sumas and then turn the trailer over to the owner there. A US citizen does not have to pay Canadian taxes but the selling company has to prove the trailer was exported to exempt the purchaser from paying the Canadian taxes.

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Old 04-02-2016, 12:02 AM   #20
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Barry,
most US banks, unlike banks in other developed countries, don't offer specific currency accounts.
You guys need to get with the times!!
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