tzlee.com/blog

Author: Justin Lee

  • Real World Technology

    I’m leaving for Sydney later tonight and will be flying on the Airbus A380. I know we’ve heard about wing cracks on the A380 and wifey was just getting a little paranoid that we’re going to fly in a potentially cracking aircraft tonight.

    So wife’s paranoia* got me reading up on the cracks.

    * I’ll have to convince her it’s safe to fly or she’ll squeeze my arms so hard on take-off that blood just stops flowing.

    Anyway just to quickly summarize, the cracks were small hair-line cracks in the feet of ribs in the wings. This was a result of using newer, lightweight materials to save weight and improve fuel economy.

    If you make an aircraft bigger, it gets heavier so you’ll need to make the wings bigger and the engine more powerful. It’s only natural that fuel economy takes a hit.

    The automotive industry works similarly – the easier way was to make things more aerodynamic and lighter so that fuel economy improves, but with newer safety standards this is starting to become a challenge. Making an engine do more work with less fuel was the difficult part.

    The aircraft turbofan is already very efficient (at cruising speeds) but automotive fuel-saving technologies still has some ways to go. Nevertheless, the automotive industry has seen some pretty awesome new technologies in the past decade, which explains why I am such a fan of them.

    But I’m not going to talk about cars today. This brings me to another point: What drives technology?

    Technology is an integral part of our evolution and my belief is that real world needs are the main drivers of good technology. Unfortunately for the folks who would like to believe everything new is good, I do not believe its true. Good technology is not just any new technology, but technology that works to solve a real world problem – hence my love for automotive technology. In fact, old technology can sometimes be better than new technology.

    I think that aviation and automotive industries are two of the major drivers of technology; if not for space flight and aviation, we wouldn’t have GPS, accelerometers and gyroscopes in the iPhone today.

    In the recent years the automotive industry has gained a lot of traction. We’ve seen new engine technologies that improve both power and fuel efficiency, reduced emissions and new gadgets that improve safety. These are technologies put to real-world tests in everyday use, and these technologies are what I believe where the real money should be.

    Not social networking. Not group buying. Not building some iPhone app.

    Of course, these are just my personal opinions.

    In today’s fast-paced environment we are distracted by the Internet. Our thoughts are becoming more and more shallow and short-sighted. Most new technologies are built around dreams and desires rather than real needs.

    I’m not downplaying the importance of dreams but I my worry is that many are headed towards building dream/desire and we’ll soon be starved of real talents to serve our needs – and I think it’s already happening right now in our society.

    If you’re thinking of building the next big thing, give a few minutes to think about what I just wrote here.

  • MP4 videos on my bedroom TV!

    Just found out that the (not so) new 32″ Panasonic LCD TV (Japanese technology!) in our bedroom plays MP4 videos from a USB flash drive flawlessly! I wasn’t able to play AVI videos with all sorts of weird video codecs in them – usually DivX.

    I find the new LED TVs too bright and contrasty. Colors didn’t appear natural and I got this “old technology” LCD TV for $399 a few months back. It’s awesome and in fact very ideal for bedroom use as the lights in a bedroom are usually dimmer. Please grab them before Apple starts making TVs with iTunes built in that costs $1,488 or something like that.

  • Balloon scheme (loan) is not what it sounds like

    Addendum, Oct 2017: I have further simplified this article for the benefit of the many visitors every month. This article is one of the highest hit articles on my blog, and it is actually a bit worrisome that even banks have joined in to offer the scheme now. The MAS rules for car financing have also changed, so many of the figures have been updated to be current. Please support me by clicking on ads that interest you. It will help me keep this blog alive and allow me contribute more articles to the Singapore motoring community.

    I came across a loan scheme called the “balloon scheme” recently. Some people say this loan scheme existed a long time ago, but I have not heard of it until recently so it’s new to me.

    My first thought: “Wow, these financial tools will evolve in 101 ways just to get people to take a loan.”

    But before reading on, please take some time to understand the Singapore vehicle taxation structure. Without that knowledge, it may be difficult to understand some of the terms used here.

    So what is a Balloon Scheme?

    The Balloon Scheme is deferred payment scheme designed to reduce the monthly instalment sum. The flip side is high interest rates and a large sum to pay at the end.

    Technical details: The interest rate is applied to the full loan amount, and then the minimum PARF rebate (or “scrap value”) is deducted before dividing into monthly instalments.

    The lower monthly instalments make it seem extremely favourable especially if you are buying an old car, but I would suggest to avoid balloon schemes. Why?

    Example of calculations

    Let’s say you bought a used car for $100K and intend to get a 5-year loan for $60K. The car has a min. PARF value of $10K.

    Typical Loan Balloon Scheme
    Car price $100,000 $100,000
    Min. PARF $10,000 $10,000
    Down payment $40,000 (40%) $40,000 (40%)
    Loan amount $60,000 (60%) $60,000 (60%)
    Interests $5,640
    @ 1.88% x 5 years    		 $8,040
    @ 2.68% x 5 years
    Total Instalments Payable $60,000 + $5,640
    = $65,640    		 $60,000 + $8,040 – $10,000
    = $58,040
    Instalments (Monthly)  $1,094/mth $967/mth
    Final Instalment $1,094 $10,000 + $967
    = $10,967

    That’s a $127 reduction in installments! Yeah! Let’s do that balloon scheme now!

    But wait… in addition to the extra $2,400 in interests paid, there is also a final sum of $10,000.

    The implications of the final sum

    If the COE expiry coincides with the end of the loan period then it is fine because the min. PARF rebate from the government would cover the final sum, but what if…

    What if the car has several years to go?

    You will have to cough up this $10,000 to keep your car. Or you’ll have to dispose the car prematurely and you will stand to lose even more (see below).

    What if you were stuck in a bad financial situation?

    In an event that you have to dispose (i.e. sell) the car prematurely before the end of the loan term, you will likely suffer even more financial losses.

    Early disposal

    Here is an illustrated example of an early disposal/sale.

    Selling at 8th year Selling at 10th year
    Car price $100,000 $100,000
    Sale price $20,000 $10,000 (Min. PARF)
    Years 8 years 10 years
    Depreciation ($100,000 – $20,000) / 8
    = $10,000/yr    		 ($100,000 – $10,000) / 10
    = $9,000/yr

    It is clear that selling the car at the 8th year would have cost the owner and additional $1,000/yr over 8 years, that is total of $8,000! This has not taken into account any financial charges and fees should the car be disposed even before the end of the loan term. (Read up on the Rule of 78 if you would like to find out more.)

    The reason for this is because an older car should depreciate less, so the price of the car dips more than it depreciates (in a straight line) as it ages. There are some specific situations, however, that this may be not true and will depend largely on market forces at the time of sale, e.g. high COE prices would result in high car prices.

    Final words

    If you have to use the balloon scheme to afford a car, chances are that you are stretching your finances.

    The two biggest purchases in our life would likely be a property and a car; but unlike property, a car in Singapore is not an asset. It depreciates in value quickly from the moment you buy it.

    My advise would be to avoid the balloon scheme and find a car that you can comfortably upkeep.

    Addendum, Oct 2014: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore

     

  • Screw you, PayPal. You are off my list.

    I am absolutely pissed. If I’m an ass I can basically go and reverse any PayPal purchases I’ve made and I’ll get away scott-free thanks to their “consumer protection” policy.

    I’ve had customers who received their orders, signed on the SingPost consignment note and then later did a charge back on their cards. Not only did PayPal honor the payment reversal, they still charged us the payment processing fee.

    This means if the transaction was $1,000, I not only lose $1,000, I’ll still have to pay PayPal ~$40 (~4%) for payment processing. What kind of logic is this?

  • Why is everybody building an iPhone app?

    I’ve had many many self proclaimed wannabe entrepreneurs approaching me with “compelling” iPhone app ideas, and oh, it’s top secret – before they breathe a single word about it I’ll have to sign a 3,112 page NDA so in an event that somebody else has the same idea I can be brought to court and made to compensate billions.

    What is it with iPhone apps, really? Even SMRT released an app and had a press release for it. For what? Can’t they just post disruptions on Twitter and Facebook – which I think they already do? Why build an app? They think my grandmother has an iPhone? An app is not the solution. A proper announcement system and staff training is.

    The phone and mobile apps are just technologies and delivery mediums. Building a product around a technology is a wrong start. Technology should be built around a product instead. A lot of “app” pitches I’ve heard have no real value. Technology alone does not sell a single cent. It must solve a real world problem. Would you buy an app because it could, for example, switch on your microwave at home? Has remotely switching on a microwave been a need for housewives?

    If you’re reading this and thinking of building an app, please look at the product as a whole. If it’s just another one of those apps, I think you may be better off spending your time and money (app developers charge a really crazy sum BTW, just because it’s HOT) building a real product with a HTML5 site that will truly scale when the need arises… at a fraction of the price. If you are a business owner, don’t derail your core business by focusing on apps and whatever technology trend that comes along.

    Sometimes no technology is the best technology.

  • What does it really cost to own a car in Singapore?

    Update: Do also read the updated article I wrote here in 2014: How to buy a used car in Singapore

    OK, I read this article and felt I had to put in a few words of my own as it was not accurately represented.

    Before I move on, those who are not familiar with the basic taxation structure for cars in Singapore should read my earlier blog post.

    If you have understood the taxation structure in Singapore (I know, it’s a lot to swallow) you would realize that the author of the above article failed to take into account the minimum PARF rebate. The author also picked a car that’s way overpriced in the current market.

    Here’s the facts. A savvy car buyer would have looked at all available options. And to pick a Toyota Altis at the price of $105,988… are you out of your mind?

    Let’s take a Volkswagen Jetta. List price $115,800. Called VW, they have a $6,000 discount. So that brings the list price down to $109,800.

    The OMV of this car is $18,500, so that gives us a $9,250 PARF rebate (50% of OMV). The straight-line depreciation of the car over 10 years is hence $109,800 – $9,250 = $100,550.

    Now, that’s just the car. All taxes inclusive – GST, etc. are already priced into the list price.

    Next, the loan. Assuming if you’re buying a ~$100k+ car, you should must have some cash for downpayment. A wise tip here – at least downpay the minimum PARF rebate and don’t take a full 10 year loan or you will be in serious debt in an event you need to sell your car. If you don’t even have cash for downpayment – sorry to say but Taxi is your friend for now.

    So let’s say we take a 1.88% (compounded) loan over 8 years for the sum of $100,550, the interest works out to be ($100,550 x 1.88%) x 8 years = ~$15,123.

    Adding that to the original sum of the car you have $100,550 + $15,123 = $115,673. The monthly repayment would be $115,673 / 8 years / 12 months = ~$1,205.

    The rest is pretty straightforward… let’s use a table to add ’em up. Here’s the true month-to-month affordability of a VW Jetta 1.4 TSI as of Jan 2012. Note some variables like insurance, parking and ERP really depends on each individual’s profession and usage of the car.

    Item S$/mth
    Loan installments $1,205
    Insurance @ $2,400/yr, no NCD $200
    Road tax @ $620/yr $52
    Fuel @ 20,000 km/yr, 13km/l @ $2/l $256
    Servicing @ $800/yr $67
    Parking (HDB + Office) $200
    Others (ERP, etc.) $100
    Totals $2,080

     

    Now, that’s $2,080 for a VW Jetta. So by wise financial guidelines that you should not spend more than a third of your salary on a car, you (or your family) should take home at least $6,000 to buy a car like that…

    What if you (or your family) only take home $4,000 a month? Under $1,500 a month for a car… is it achievable? Answer is… YES! Pick up a 2005 Nissan Sunny for $23,800. Bargin a little bit and bring it down to maybe $23,000… and here’s the calculations.

    Actual car depreciation (2005 cars retain 55% of OMV) = $23,000 – ($13,000 x 55%) = $23,000 – $7,150 = $15,850.

    Loan = $15,850 over 3 years @ 1.88%: $15,850 (principal) + $893.94 (interest) = ~$16,744. This works out to ~$465 per month.

    Item S$/mth
    Loan installments $465
    Insurance @ $2,000/yr, no NCD $167
    Road tax @ $742/yr $62
    Fuel @ 20,000 km/yr, 9km/l @ $2/l $370
    Servicing @ $800/yr $67
    Parking (HDB + Office) $200
    Others (ERP, etc.) $100
    Totals $1,431

     

    I know what some of you may be thinking – it’s just $600 more a month, why not get the Jetta. Well, $600 can kill you – that’s $7,200 a year. I eat about $600 per month on average so it really makes a lot of difference. I can either eat plain bread or have good meals or I can save that and go for a crazy vacation. It’s all about balance.

    Of course on top of just plain numbers, the value of having the convenience of a car is hard to quantify – especially if you have a pregnant wife, or an old folk, or just simply need to haul that big box from Ikea.

    Public busses and trains aren’t fair comparisons as they are mass public transit and may not bring you to your doorstep. Taxis on the other hand are getting relatively expensive and inconvenient – the queue, the wait, etc.

    So if it doesn’t break your bank – for better quality of life you should consider a car.

    At the end of the day… buy wisely, drive safely. Cheers!

    – Justin