Ways to pay for flight training?

[Econ]

TXCAP4228,

Your calculations are incorrect. Using yor scenario the interest paid on the car over the 5 years totals $2,748.34. Interest earned on the CD (compounded monthly and adjusted for the capital gains tax totals $2,289.92 for a difference of $458.31 This means that using your numbers, the person who finances the car and invests in a CD will lose $458.31. If you think my calculations are incorrect put together a simple amortization schedule in a spreadsheet. Or, give me your e-mail and I'll send you mine.

 

[Econ]

Vardog,

My calculations were serious and accurate. I'm not distorting anythiing. As I stated, the interest earned on the $20,000 investment in a CD was adjusted for the 20% capital gains taxes to be paid on that interest at the end of each year. When you reduce the total accrued principle and interest by the amount of taxes to be paid at the end of each year an investment in the CD loses you money in the situation we are discussing.

You can not avoid the capital gains taxes unless you have other passive investment losses. You will pay a capital gains tax so it becomes very relevant in situations such as this.

If you disagree with my calculations I'd really be interested in knowing where and why you disagree.

 

[Vardog]

I'll bite

you are absolutely correct. this capital gains tax thing makes me want to pull all of my money out of interest baring accounts and put it in my driveway to get rained on.

 

[Econ]

Vardog,

I didn't think you would actually come up with a response. First you refer to somebody else as a moron and then run when your opinions are challenged. Yes, finance is not your forte. You should stick to flying.

 

[Vardog]

what you just wrote is not a responce

you have single handedly taken the simple subject of financing flight training and turned it into a forum in which you can spout your 'knowlege.' by misunderstanding the purpose of this dialogue, and taking things that were said out of context, you have muddied the waters for some 17 year old kid who is not trying to buy a car - though that was a valid example of finance vs. paying cash. you can study this and fill it with your vast knowledge of capital gains taxes and it will not change my mind one bit. capital gain tax or not, there is no good reason to put hard cash into something that depreciates in value. it is financially stupid. it is turning, in our example, 20,000.00 into 5,000.00. it has been difficult to have this dialogue with you because you pretend not to see this. that is why i assumed that you were just kidding. Sorry to make that assumption.

 

[Econ]

Vardog,

I can't resist!

you have single handedly taken the simple subject of financing flight training and turned it into a forum in which you can spout your 'knowlege.' by misunderstanding the purpose of this dialogue, and taking things that were said out of context, you have muddied the waters for some 17 year old kid who is not trying to buy a car - though that was a valid example of finance vs. paying cash.

I simply took your example and demonstrated how your assumptions were incorrect by "running the numbers as you suggested. This is muddying the waters?

you can study this and fill it with your vast knowledge of capital gains taxes and it will not change my mind one bit. capital gain tax or not, there is no good reason to put hard cash into something that depreciates in value. it is financially stupid.

Vast knowledge? I didn't realize that knowing that capital gains are taxed at 20% was a vast knowledge but ok.

it is turning, in our example, 20,000.00 into 5,000.00. it has been difficult to have this dialogue with you because you pretend not to see this. that is why i assumed that you were just kidding. Sorry to make that assumption.

I actually see what you are trying to say. Automobiles certainly do depreciate and are a terrible investment. So what? Financing a vehicle does not keep it from depreciating. It still decreases in value. The matter at issue here is cash flows. Using your example, the person financing and investing $20,000 would be better off paying the $20,000 for the car because that way he avoids the interest which is not offset by the interest earned on the investment.

 

[TXCAP4228]

Capital gains...

TXCAP4228,

Your calculations are incorrect. Using yor scenario the interest paid on the car over the 5 years totals $2,748.34. Interest earned on the CD (compounded monthly and adjusted for the capital gains tax totals $2,289.92 for a difference of $458.31 This means that using your numbers, the person who finances the car and invests in a CD will lose $458.31. If you think my calculations are incorrect put together a simple amortization schedule in a spreadsheet. Or, give me your e-mail and I'll send you mine.

Econ, I was indeed ignoring the effects of capital gains taxes. The numbers based purely on interest earned vs. interest paid were my point. In any case I didn't used a spreadsheet, I used my trusty HP17B(2).

I would suggest that this conversation has devolved to the point where the details of the financing are somewhat moot (and not necessarily comprehensible to anybody not in the business).

Do any of us really disagree with the premise that a 17 year old really has no business going in to debt to pay for flight training?

My suggestion is get a part time job - or use that tried and true source: Mom and Dad.

 

[Vardog]

JP

we are not trying to keep the automobile from depreciating. we are trying to keep from throwing away our money. I'm going to run away now as i have a life that seems to have paid me well inspite of my foolish notions of money and how the world works. maybe we'll pick this up some other time.

as for your advice on my flying career. my ratings are the spoils of my foolish financing methods and i dont give a ... what you think i should stick too.

 

[Econ]

TXCAP4228,

Yep, I couldn't agree more. If this young man is still in high school then going into debt is probably not a great idea. I think he ought to work and save as much as he can while in high school so if he ever does have to finance he won't have to finance as much. My student loans were a painful thorn in my side until I got them paid off. I wish I'd been smart as a kid and saved the money I made.

Kevin

 

[Econ]

See ya Vardog!!