Tag Archives: Controlling the Universe

The Leasing Game

There are people in this world who hate leasing vehicles.  The reasons vary.  My favorite one is that leasing leaves you with nothing to show for the money you’ve spent.  Then comes the expense.  You’re responsible for maintenance.  You spend all this money on a car that isn’t even yours.  You pay insurance premiums that will ultimately pay out to the leasing company in the event of an accident.  They also say that you’re paying for the worst depreciation on the car — when it is first released into the wild.

I can’t deny the truths behind these arguments.  Leasing is kind-of an odd thing.  You really do insure a vehicle that you don’t own.  You really do have to maintain it on your own dime (although, a warranty will cover everything else.)  You really do have to give it back at the end of the lease term.  So, what’s the up-side?  That depends.

A car lease is a contract wherein the lessee (you) agrees to pay money for a given term in exchange for the use of a vehicle.  The amount of money you pay is determined by the purchase price of the vehicle less the residual value after the lease term.  The residual value is how much the lesser (the people leasing you the car) think the car will be worth after you have used it.  This value seems arbitrary, but it is actually based on several obvious factors: mileage, wear and tear, “gap insurance”, and supply and demand.

Mileage is the most obvious variable in the residual value equation.  A lease always includes very strict mileage allowances.  For every mile over that allowance the car has traveled, you pay extra.  So, right here — right at this very sentence — if you drive more than 12,000 miles in a year, you shouldn’t lease a vehicle.  Honestly, you shouldn’t be driving 12,000 miles a year.  Driving is a total waste of time and energy on your part.  It’s expensive.  It’s boring.  It’s dangerous.  Don’t do it.  If you drive only 3,000 miles per year, you may want to consider purchasing.  Why?  Because you won’t use the car as much as you could have, and you will be paying for utility that you do not utilize.  Just buy a car and plan on keeping it forever.

Wear and tear is also pretty obvious.  The dealer expects the car to need some work when it comes back.  This work will be minor, but it still has a cost.  That is factored in to the residual value.  After a 36,000 mile lease, the car will likely be out-of-warranty, but still very mechanically sound.  This is great for the used-car market, where “clean”, low-mileage cars actually go at a premium.  This relates to the supply and demand factor.

I use quotations on “Gap Insurance”, because the actual contract isn’t technically gap insurance.  There is a risk that a certain number of lessees will total the cars they lease.  The dealer factors that risk (and the cost of that event) into the lease.  Meanwhile, you pay regular car insurance that covers smaller accidents, medical bills, etc.

Finally, and the least obvious of the factors, is supply and demand.  The worst thing about this factor is that it is constantly changing.  The residual value of a vehicle is largely influenced by the greater used car market.  The used car market is supplied by off-lease vehicles and trade-ins.  Car lease terms range from 24-48 months, with the most common advertised term being 36 months.  Car loan terms have taken on much longer terms in recent years, as long as 72 months.  In fact, In 2010 nearly 1/3 of car buyers financed using a 6-year (72 month) car loan.

What do you know about car loans, or just loans in general?  I’m going to take a minute to explain them.  If you already know, feel free to skip ahead.  Most people know the basics of loans.  An interest rate and a term is advertised.  The interest rate is applied to the loan balance repeatedly over the life of the loan.  In many cases, the interest rate is applied monthly.  The other advertised value is the principle, or sale price, of the vehicle.  You must understand that both the interest rate AND THE TERM determine how much extra money you pay.  So often people focus on the interest rate.  The term can have as much or more influence on the total interest charged.  Furthermore, you must understand that loan payments are biased toward the balance of the interest, and gradually change bias towards the balance of the principle (the car’s sale price)

Let me try to put that in a concrete example, without getting too mathy.  Let’s say you want to finance (not lease) a $10,000 car (forget taxes for now).  The interest rate is 6.00%  The term is 36 months.  Over those 36 months you will pay $1996.81 in interest.  Great.  When you’re done paying for the car, it actually cost you $11996.81.  And, your monthly payment will likely be $333.  That’s pretty steep for a $10,000 car!

Now, let’s say you want to finance that same $10,000 with an interest rate of 3% for 72 months (6 years).  That interest rate is really attractive, right?  I mean, it’s HALF of the other interest rate.  But, the term has doubled.  Over those six years, you will pay $1969.48 in interest, and the car will have cost you $11969.48 total.  Now, your payment is only $166!  How wonderful!

But, is it wonderful?  Now that you’ve seen compounding interest in action, you need to understand depreciation.  Accountants learn that word in college, and all it means is “things lose value.”  Cars, houses, mobile homes, your computer, your tablet, your phone…  Everything you have ever bought becomes less valuable after you buy it.  They all take on wear and tear.  They all become “old”.  There is no mathematical equation that predicts depreciation in the way that we can predict interest.  The car’s value is determined by whoever is willing to buy it, and the amount they are willing to buy it for.  Car dealers buy used cars all the time, so they often have a big say in how much value a used car has.

Now, as soon as you drive your brand new $10,000 car off the lot, it has lost value.  It doesn’t lose value gradually, the value drops FAST, and then gradually sinks as the car ages.  If you owe more money on the car than what someone else is willing to pay you for it, you are “upside down” in your loan.  In other words, if you want out of the loan, you need to come up with not only the value of the car, but also the difference between that value and the balance of your loan.  If you’ve only made two payments on your $10,000 car financed for 36 months, and someone is only willing to pay you $8,000 for it, you need to come up with $1333 to cover the difference.  However, if you financed that same car for 72 months and you get the same offer, you need to come up with $1668.  Why?  Because your monthly payment for a 72 month term is only half of what it was for the 36 month term.  (36 month term payment was $333/mo, 72 month term payment was $166/mo.)

I’m trying to paint a picture here that shows you why financing anything is a terrible idea.

To make it even worse, loans are designed such that you pay more towards the interest at the beginning, and more towards the principle toward the end.  For example, 90% of your first payment goes towards the interest you own, and 10% goes toward the principle.  These rates gradually swap over the loan term, until your last payment is 10% interest and 90% principle.  What does that mean?  Well, number one, it means that the finance people want their interest first and foremost.  And, number two, it means that you actually aren’t paying much toward the car’s actual cost.  It’s another way to keep you upside down in the loan and to keep you from selling the car before you’re done paying the interest (which is where the bankers make their profits).

Jeez.  This is a long post.  Go grab a cup of coffee or tea and meet me back here.  I’m about to start talking about leasing.

So, we’ve established that long financing terms are bad, even at lower interest rates.  We’ve described how loans are set up to keep you from being able to sell the car before the loan term is over.  (And, at 6 years, you’re probably stuck with a car that is falling apart.)  We’ve shown that a low payment is both a blessing and curse.

Now, on to leasing!  LEASING IS STILL A FORM OF FINANCING.  You pay interest on a lease, but it has a different name.  This is the “money factor”, and it is basically an interest rate.  So, yes, leasing is just as bad as financing.  But, when you lease, you agree to pay for only the portion of the car that you use.  No, you don’t only pay for the driver’s seat and the steering wheel.  You pay for the car’s loss of value.  So, if that $10,000 car is only worth $6000 after a 36 month lease, you have only payed $4000.  $4000 divided over those 36 months is an $111.11 per month payment (not including the interest).  That’s ridiculously low, right?  I was just talking about how a low payment was a bad thing.  Well, in this case it still is.  The car is still losing value as you drive it.  More on that later.

Most lease advertisements include a “down payment” amount.  It’s a payment that goes directly toward the price of the car, and often times includes a sort of security deposit.  The portion that goes directly to the car is basically a pre-paid amount toward the lease.  This is good and bad.  Paying money down brings the monthly cost down.  For example, if you put $1000 down payment on your $10,000 car lease (36 month term), your payment drops to $83.33 (not including interest).  Holy cow!  That’s all fine and good.  But, what if you’re driving along and some joker runs a red light.  He hits your brand new leased car that you just drove off the lot and totals it.  You walk away form the accident unscathed, but you’re now carless.  You know what else you are?  You’re out $1000.  That’s right.  Your down payment gets carried away on a flatbed truck.  That’s why my advice is to never, ever put a down payment on a lease.  But, I don’t trust other drivers at all.

So, is that all there is to leasing?  Yeah, basically.  But, no, there’s much more.  You should be aware that car dealers lease cars from each other all the time.  In fact, they lease cars and then they sell them.  Sounds shady, right?  It’s not.  Basically, they pay a monthly payment to keep the car on their lot.  When the car sells, they pay off the lease balance and pocket the difference between the sale price and that lease balance.  The best part of this is that you can do it, too.

Car dealers don’t want you to do it, though.  They want you to pay the lease payment every month (because you’re paying interest) and then turn the car back in when you’re done.  The problem with this is that they will change the tires, give it a fresh coat of turtle wax, and then re-sell it for a much higher price than the residual value.  But, hey, that’s the business.

Remember, though, that cars depreciate faster than most people can make payments toward their financing.  A lease works in the same way.  But, because you’re only paying for a portion of the car’s overall price, and because you’re guaranteed a certain residual value at the end of the lease, you have the opportunity to out-pace the depreciation.  In fact, a 36 month lease can be set up in such a way that you beat the depreciation around the 24 month mark.  Now, understand, at 24 months you may only be breaking even with the car’s resale value.  And, also understand that you may have to sell the car privately in order to break even.  (This is because private sales are higher than dealer trade-ins.)  However, many dealerships offer incentives if you defect from one brand to another.  For example, if you take your Honda to a Ford dealership, Ford sometimes offers an incentive for first-time Ford buyers to trade in their other-brand cars.

All of these things can help you beat the depreciation on the car, and you can escape a 36 month lease after only 24 (or so) months.

HOWEVER, and this is a big deal, you must have negotiated a very good lease contract to begin with.  A dealer can AND WILL overcharge you for both leasing and finance.  You must go to the dealership knowing how much you plan to pay, and be willing to walk away from the deal.  This is another reason to not wait for the lease term to end before getting rid of the car.  If you have no ride home, the dealer has leverage on his side.  Are you gonna take a taxi home?

The internet is chock-full of car lease calculators.  Most manufacturer websites also list the terms of the lease contracts in the “incentives” and “offers” section.  What you need to do is go to these sites and look for the lease offers for the car you want.  Find what the sale price and the residual value are (IN THE FINE PRINT) and plug those into a lease calculator.  The calculators typically give you a money factor, and the manufacturers often hide that.  Calculate a lease payment, with or without down payment and trade-in value, and then have that number burned into your brain when you go to negotiate the deal.  (Also, double check your number.  Make sure you have input all the information.  Check your calculation against the lease offers to see how realistic it is.)

If they bring you a quotation that is wildly out of proportion with your calculated number, you need to get angry with them.  Or, laugh in their face.  Get them as close to your number as possible.  I had a Ford dealer bring me a quotation of $300/mo for a Ford Fiesta!  I knew from my research that I could get the car for $200/mo easily.  And, $200/mo would be a fair deal to us and to them.  We had already told the guy what we were willing to pay, and he insulted us with his ridiculous offer.  We insisted that our number was fair, and that if he came back with anything different that the deal was off.  Sure enough, they came back at $218 (which included tax of $15/mo).

Now, the problem with this strategy all comes back to the supply and demand factor.  As I said before, the used car market is supplied by off-lease vehicles.  When more people lease vehicles, more vehicles flood the used card market.  When there are a lot of used vehicles for sale, their prices all come down.  Why?  Because supply is higher than demand.  They become harder to sell when you have too many.  Furthermore, when people end a lease, many of them start a new lease.  And, as more people move into leasing instead of buying, used car sales drop.  How does this affect leasing?  Well, as used car prices drop because of oversupply, residual values on leases also drop.  Therefore, leases become more expensive.  Furthermore, as demand for leases increases, car dealers start to charge more.  So, leasing becomes even MORE expensive.  Eventually, these supply and demand forces hit another tipping point, and it all goes in reverse.  Where are we right now, as of mid-2015?  We’re moving toward an over-supply of used cars and more popular leases.  The leasing game may be getting harder to play.

And, when that happens, it becomes more attractive to purchase lightly used car.

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The Football That Can’t Not Be Caught

This might sound crazy, but I’ve been pursuing a Bachelor’s degree for about six years.  What’s crazier is that I’m only half way done.  I can explain:  I go part time, and I needed a lot of pre-requisites that weren’t included in my previous degree.

What’s possibly even more crazy is that I have had ideas for my senior project since before I even started the program.  I am here today to discuss one of those ideas.  When I first had this idea, I had only a cursory knowledge of the technical details.  Furthermore, I knew it was possible, just not what all it entailed.

If you read the title, you know the idea.  Perhaps it’s about time I just said what it was.  …  I could just keep referring to it as “it” and prolong the anticipation for the big reveal.  That is, of course, assuming you have not read the title of this post.

The idea is guided artillery.  Not a new concept.  However, most guided artillery is designed with one major criteria that we will be leaving out of this project:

Traditional Guided Artillery Design Criteria

  1. Kill People

However, my idea still involves guiding a projectile at a person (in theory).  However, this projectile would not explode on impact.  It wouldn’t explode at some proximity.  It wouldn’t explode at all.  In fact, it would be soft, and grippy…  Like a Nerf football.

So, let’s list the desired end-user functionality of this guided artillery football:

Toy Guided Artillery Design Criteria

  1. Be throwable, like a football.
  2. Be catchable, like a football.
  3. Change direction during flight so as to minimize the distance between itself and some designated target.

Numbers one and two seem simple enough.  There might be some off-the-shelf items that could cover those bases.  I don’t know, maybe I’m underestimating the difficulty of those two criteria.

Number three is the real challenge.  How the hell do you make a football guide itself to a target?  The first problem that comes to my mind is that the ball’s flight time is limited by who threw or kicked it.  That greatly limits its ability to reach a target.  Secondly, the ball has no control surfaces with which it could change its direction during flight.  Along those same lines, it requires a lot of practice to develop the skill required to throw a stable-flying football.  Finally, and probably the worst part, it takes A LOT of fast-moving data and sensing to fly anything toward a target.

So, let’s split this big problem up into little bite-size, chewy pieces.

  1. The Guidance System
    1. Navigation – “Where am I?”
    2. Guidance – “Where am I going?”
    3. Control – “We’re in the pipe, 5 by 5!”
  2. Flight
    1. Stabilization
    2. Control Surfaces

The guidance system may be the most complex part of the project.  However, flight isn’t easy.  Flight is mostly a mechanical issue.  And, in this case, the control surfaces will be totally experimental.  Therefore, the flight surfaces cannot be trusted.  Stabilization is easy enough, though.  We just need to stick some fins on the back.  Or a long, flowing tail.

The control surfaces themselves are rather difficult.  In order for the football to be throwable and catchable, the control surfaces need to be discrete.  In other words, they need to be hidden away until they’re needed.  Furthermore, typical control surfaces on an air plane take advantage of the large lift-generating wing in front of them to alter the lift output.  The football will have small stabilizer wings, if any wings at all.  That means that it will not generate its own lift.  Therefore, the control surfaces are actually going to be simple air brakes.

Now that we have the “simple” part out of the way, let’s move on to the complex part.  The guidance system needs to answer two questions continously:  1. “Where am I?” and 2. “Where am I going?”  The answers to these questions will determine which control surfaces deploy and at what time.  However, answering these questions is potentially very difficult.

“And you may ask yourself

Well, how did I get here?”

I propose that the guidance system use an inertial measurement unit and a fixed-point reference (the starting location) to determine where it is.  To do this, the football will require an accessory:  A throwing glove.  The throwing glove will have magnets embedded at strategic locations along the gripping surfaces.  The ball will have hall effect sensors in close proximity to its outer surface.  In this way, the ball will know when it has left the thrower’s hand.

Next, the ball will have an accelerometer and possibly a gyroscope.  Many accelerometers are now capable of measuring the constant pull of gravity and comparing it to the X, Y, and Z axis.  When the hall effect sensors detect that the ball has left the thrower’s glove, and by measuring the change in acceleration on 3 axes and comparing them to the acceleration of gravity, the ball will know approximately its location relative to its starting point.

But, how does it know where to go?  I’ve been putting a lot of thought into this.  The best I have right now is, “I don’t know.”  I don’t know, because of the following reasons:

Reasons I Don’t Know

  1. The form factor limits the complexity and fragility of on board sensors.
  2. The form factor also limits the accuracy of on board sensors, because the ball cannot be expect to be precisely stable.  In fact it may intentionally be spun about its axis to gain distance.

Anyway, while writing those last two sentences, I had an idea aside from all the commonplace ideas (cameras, infrared, radar, GPS, etc).  However, this idea greatly limits the “fun factor” of the concept.  Although, it does use the existing hardware and adds only one more accessory:

THE CATCHER’S GLOVE.

The catcher’s glove will essentially just be another thrower’s glove.  It will be exactly the same.  The difference, though, is how it is used.  Before the ball is thrown, it must be told what mode it is in.  The first mode will be “target mode”, wherein the catcher makes contact with the ball.  While making contact with the catcher, the ball initializes all of its location variables.  Essentially, X=0, Y=0, Z=0.  Next, the ball is placed in “launch mode”.  In this mode, it is recording changes in its location and waiting to both make contact with the thrower’s glove AND to lose that contact.  Upon losing contact, the ball enters “flight mode”, wherein it tries to get all of the axial changes back to zero by actuating the control surfaces accordingly.

And that, my friends, is the football that can’t not be caught.

Espresso at home.

If you don’t already know, espresso is awesome. It has almost three times the caffeine content per fluid ounce as regular coffee. It was invented by a man who wanted his workers to take shorter breaks and be more productive. That sounds awfully familiar. The only difference in my situation is that I’m both “the man” and “the workers”. Coffee is to Earth as the Spice Melange is to Arrakis.

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So, you should be maximizing your coffee intake by both increasing the dosage while simultaneously reducing the volume required to achieve that dosage.  The solution is AN ESPRESSO MACHINE. But, which espresso machine?

I’ll be totally honest with you. I’ve only ever used two espresso machines. With peak confidence, I can tell you that the following recommended machine is the BEST espresso machine I have ever used. Introducing the KRUPS XP601050 SS Mechanical Espresso Machine:81ig5EvwlJL._SL1500_

A lot of brands tout the high pressure of their machines. A lot of brands add tons of little gadgets that no one really uses. Still, others just make crappy machines. What makes a good machine?

  • Heat
    1. The ridiculously over-caffeinated scientific community has determined that optimum coffee brewing temperature is 195-205 degrees Fahrenheit.  Too cold and you won’t get all the goodness from the coffee.  Too hot and your drink will taste like spicy Taco Bell sewage.  I don’t mean sewage as a metaphor.  I mean straight up spicy sewage.  Fortunately, the KRUPS has a thermoblock heater which essentially heats the water on-demand.  This is quick, efficient, and helps to keep the water temperature constant.
  • Build Quality
    1. I don’t care what anyone else says.  You need a machine that is well designed and well built.  Don’t cheap out on something that is mostly plastic.  Also, don’t let a brand convince you that their over-priced plastic machine is actually well built.  I’m not trying to say that plastic is a primary indicator of poor build quality.  But, it’s a good start.  I say this from a product designer standpoint.  A product designer chooses plastic when he doesn’t really care about precision and he DOES care about cost.  So, beware.  If the designers made a cheap housing, the components that matter are probably pretty cheap as well.  The KRUPS is mostly stainless steel.  The drip tray is plastic with a stainless steel fascia.  That’s actually a good thing, because it makes cleaning much easier.  And, you don’t need precision in a drip tray.
  • Steam Stem
    1. You need an easy-to-use steam nozzle.steam stem  Have you ever steamed milk before?  There’s a trick to it.  A well-designed steam nozzle actually makes learning the trick easier.  The KRUPS’ nozzle is two-piece.  The outer stainless steel shell has holes around the circumference that pull in air and milk.  This is nice, because it’s easy to see where you need to position the stem relative to the milk.  Most baristas are listening for a specific sound.  It’s a distinct “sucking” sound.  If you’re NOT steaming correctly, you’ll hear violent bubbling sounds.  That means you’re just scalding the milk.  Scalding the milk barely froths it and also ruins the flavor.  While using the KRUPS, you’ll see the “trick” as well as hear it.  You’ll learn to froth milk in no-time.

Real talk:  The KRUPS has had some failures in its time with me.  I’ve owned it for nearly 1.5 years at the time of this writing.  The double-shot basket clogged up at about the 1 year mark.  I was using it every day and not caring for it properly.  I even tried taking it apart and soaking it in vinegar.  It’s just dead.  So, now I just use the single-shot basket twice in a row.  And, I make sure to keep it clean.  A little more hassle, but not a deal breaker.  A replacement basket would cost me about $20.  But, I haven’t purchased one, yet.

Furthermore, I removed the spout from the portafilter.  I found that the spout somehow ruined the crema.  After removing it, my shots have a nice thick head.  Again, not a deal breaker.  The spout simply unscrews from the portafilter.

There are a couple other things you’ll need in order to make espresso at home.  First and foremost, you’ll need some coffee.  You can use anything you want, really.  Most people are going to tell you to use a dark “espresso roast” or something along those lines.  If that’s not your style, don’t do it.  Use the same kind of coffee that you already like to drink.  But, please don’t be afraid to branch out and try new coffees.  If you’re a Starbucks addict trying to reduce costs, try some cheaper coffees.  Back in the day I would buy Publix brand vacuum-sealed ground espresso exclusively.  It was incredibly cheap, tasted like charcoal, and did I mention it was cheap?

The very last thing you will need is a coffee grinder.58204925  Some people demand that you purchase a coffee grinder that costs several hundred dollars.  Don’t.  Just buy something affordable that is well built.  You’re not serving hundreds of customers.  You’re not a coffee scientist trying to push the heights of coffee excellence.  You’re just a person trying to make espresso at home.  I can imagine that means you’re probably trying to save a few bucks as well.  You can get by with a $20 coffee and spice grinder.  And, hey, you might even use it as a spice grinder one day.  I use mine to make BBQ rubs, as well as to grind coffee.  You can always skip this step and just buy coffee that is already ground for espresso.  Also, my grocery store has a grinder next to the coffee section that is free to use, with various grind types to choose from.

Conveniently, KRUPS also makes a cheap coffee grinder.  Better yet, it’s currently the #1 selling grinder on Amazon.  I don’t own this grinder.  Mine is a $10 model that I bought from Wal-Mart back at the turn of the Millenium.  I’ve managed to destroy it and rebuild it more than once.

81OJ6qwKxyL._SL1500_Good luck in your endeavor.  Making espresso at home is well worth the investment.  Just think of the cost of a latte` at Starbucks.  If you bought one every day for a year (which we would all love to do), you’d spend over $1200.  If you invest in the KRUPS XP601050 SS and buy a $12 bag of espresso every two weeks (which is probably more often than you actually would), you’d only spend about $450 in your first year.  The machine will more than pay for itself.  If we’re really splitting hairs, you waste both time and money by driving to star bucks.  You also burn gas while sitting in the drive-through.  You’re slowly making your boss hate you every time you show up a little bit late while swilling a paper cup full of bean water.  You need to invest in an espresso machine to save money, to save time, and to try new things.

While I’m at it, I’d just like to give a shout-out to Intelligencia Coffee.818MKqMpHdL._SL1500_  I had it for the first time at a local coffee shop.  It has a beautiful flavor.  It’s a little pricey.  A bag of this stuff is smaller than a typical bag of coffee, and also more expensive.  That’s a double-whammy.  Still, when I have the money and the forethought, I run to this stuff.  It’s just that good.  I’m currently finishing off a bag of Fresh Market brand coffee.  It can’t come soon enough.  Intelligencia will blow your mind.  If all you’ve ever had up to this point is Starbucks, you’ll wonder what the hell your problem was.  For me, Starbucks is where I go when I’m in a rush and I have a caffeine headache.  I hit up the local shops who serve different kinds of coffee when I’m out and have leisure time.  Any other time, I’m pulling shots at home for a fraction of the cost of any of those places, EVEN when I’m using expensive coffee.  Do yourself a favor, branch out and try these things.  You’ll learn something new, taste something new, and more than likely enjoy something new.