The Ultimate Question: Buy or Lease?

by Wade Barnes 25. February 2013

New Car

So you’ve decided on a new car! You’ve picked the make, model, color and options but the tough question is still looming. Should I buy or lease? Like many financial decisions, the answer is highly dependent on individual situations, but to help narrow the scope of your decision, it is best to consider the benefits of leasing to see if this option is best for your situation. 

Benefits of Leasing

Perhaps the greatest benefit of leasing is the fact that you can get into a new car with low money down and low monthly payments. This means that you can afford a more expensive car with more options at a lower acquisition and monthly cost than if you were to buy the car. On top of this, when you lease a car, you have pre-negotiated the value at the end of the term, which means you can walk away without having to negotiate the value and sell the car.

Most leases are for three years and most cars come with warranties that match this term. This means you’ll never be responsible for a major repair that should be covered under warranty. This is an important benefit of leasing a car because outside of the lease expense, general maintenance, and gas, you shouldn’t have any unforeseen expenses related to leasing a car.

For business owners, another benefit of leasing a car is the potential to benefit from greater tax deduction when leasing a car for business purposes. While you should consult your tax advisor on this issue, typically you can deduct a portion of depreciation on cars owned and used for business purposes whereas lease expenses in whole are typically tax deductible which tend to be greater on a month-to-month basis.

Downsides of Leasing

The biggest downside to leasing is that you’re never gaining equity on the car; you’re essentially renting the car under a long-term agreement. Under this proposition, as long as you have a car, you’ll have car payments, and if for some reason you need to get out of a lease, there are typically expensive penalties for breaking the lease.

Leases also have an annual mileage restriction as well. Typically leases offer either 12,000 or 15,000 miles per year and if you go over the allotted mileage, it can get expensive. Since you don’t actually own the car, you can’t make any modifications to the car, and at the term of the lease you’ll be charged for every nick and ding that happened under your watch. Insurance can also be more expensive as most lease companies require higher levels of coverage to protect their interest.

Conclusion

So now you must decide to lease or buy. If you like the idea of owning a car without a car payment one day, buying is the best option. If you like the idea of having a new car with fancy options every few years and you can live within the terms of the lease, then leasing may be the best option.

If the benefits of leasing a car have outweighed the decision making process, be sure to fully understand the terms of the lease to avoid expensive costs at the end of the term. If you’ve opted to buy versus lease, consider your financing options. If rates are similar, you may want to consider using a Home Equity Loan or Line of Credit to finance the purchase to benefit from potential tax advantages (but be sure to consult your tax advisor first). Whichever way you go, be sure to enjoy your new car. If you’d like some ideas on how to save money at the pump with your new car, check out our blog: Ten Ways to Ease Your Pain at the Pump.

If you found this article helpful, be sure to check out these related articles:

Debt to Income Ratio: What It Is and How It Helps (or Hurts) Your Chances of Getting Loan

How to Decide: Home Equity Loan or Line of Credit?

The Imaginary Mortgage: Fake It Til You Make It

The Ever-Evolving Landscape of Banking

by Wade Barnes 31. December 2012

Online Bill Payments

When you think of managing your finances, what’s the first thing that comes to mind? Do you envision walking into a bank branch to conduct transactions? Or do you immediately think of signing into online or mobile banking? For many people and for most transactions, it’s the latter. Over the past few years, the landscape of financial management, and banking in particular, has changed drastically in that you as the customer are put in control.

According to Serge van Dam, VP of Mobile Solutions at Fiserv1, financial transactions can be broken into three categories: snacking, lunching, and fine dining. Snacking consists of transactions such as transferring funds or checking balances. Lunching includes bill payments and viewing online statements. Fine dining involves conversations with financial advisors, opening trust accounts, or other highly interactive transactions.

We appreciate the various levels of need when it comes to banking, and we work hard to ensure our delivery meets the needs of our customers. While we continue to provide the personal service offered by our branches, we also look to provide electronic services to meet your needs. As our customers know, we went through a conversion to upgrade our services and delivery in October of this past year. While change is never easy and growing pains may be difficult, we did this to set the stage for a more robust delivery moving forward, and we thank everyone for their patience as we’ve been working through this process.

Mobile Banking

Throughout 2012, we enhanced our electronic delivery in many notable ways. In February we launched a branded mobile banking application for both Android and iOS powered devices. Through this application you can check balances, transfer funds, view history, find branches and ATMs, and a recent upgrade offers mobile bill payments as well.

As part of our conversion, we upgraded our online banking platform which sets the stage for a more robust, user friendly interaction. Along with this, we upgraded our Bill Payment system, which now delivers up to 85% of payments electronically. With this upgrade, payments are guaranteed to be delivered by the date you specify, and better yet, the money stays in your account until the merchant receives or deposits the money. 

Popmoney® is a new online offering that delivers person-to-person payments. Using Popmoney® you can initiate a payment to anyone through a text message or an email. This addition is great for sending money to kids in school, repaying a friend for lunch, or sending a gift in place of a check.

Mariner360

Finally, we re-launched Mariner360, our Personal Financial Manager. The new Mariner360 provides a great platform for aggregating accounts across financial institutions to track spending, manage budgets, and set financial goals.

While we’ve made significant enhancements in 2012, we look forward to 2013 as we continue to refine our current delivery and introduce new technology. We will continue to keep you abreast of new technology and improvements to our services through our monthly eNewsletter. If you haven’t already, be sure to sign up. We also welcome your feedback and suggestions for future enhancements by emailing our customer service center.

As your community bank, we have the unique opportunity to offer the electronic delivery that has become fundamental in managing finances, but we also haven’t forgotten what it means to welcome you into any of our branches and provide you with friendly, local service. We are grateful for all of our customers and appreciate your loyalty over the years. We look forward to the new year and to continue embracing the ever evolving technology that enhances your banking experience.

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1 Shaw, S., & van Dam, S. (2012). Mobile Financial Services: Snacking, Lunching, Fine Dining. Fiserv Client Conference Spring 2012.

If you found this article useful, be sure to check out these related articles:

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Money in Your 30s: Manage It, Don't Be Managed by It

by Wade Barnes 4. October 2012

30Like it or not, the days when maybe it was okay to be slightly irresponsible with your money are over. You may have worked a job or two, but now you’re moving into the career years ahead. As you nail down a stable job with a stable income, it’s time to start managing your money so that money doesn’t manage you for the rest of your life. With these simple tips, we’ll point you in the right direction.

Debt

It's time to deleverage. The best way to increase your cash flow is to decrease money going to unnecessary interest charges. Focus on paying off all debt that isn’t tied to a mortgage. Concentrate on the loans with the highest interest rates first, likely those carried by credit cards, then focus on car loans, student loans, and any other non-mortgage related debt. Caution: moving debt between credit cards and other loan types is not deleveraging.

Kick the habit of assuming debt to make purchases. Save money for big purchases so you don’t have to finance these items using credit. That being said, if you get 0% financing for a period of time, don’t hesitate to use this money for free, but be sure the debt is paid in full before the period expires to avoid huge interest charges.

Family

Marriage is the most important event in a person’s life in many ways. When you marry your life to someone, you also marry your finances. This is a great opportunity to meet with a Financial Consultant to consider everything in your financial portfolio from investments to insurance and retirement planning.

If you’re planning to have children, this is also a great time to meet with a Financial Consultant. You’ll want to consider setting up a college savings plan to help cover the cost of education. While nobody likes to think about life insurance, this is a great time to make sure your family is covered in the event that the unthinkable should occur.

Savings

Start building an emergency savings account. It is suggested that you should have at least three months of salary in savings. With this emergency savings account, it will be easier to weather the storm if hard times or unexpected expenses occur.

While it might be hard to consider retirement when you’re in your 30s, there’s no better time than now to start socking away money for life after work. The power of compounding interest really adds up when time is on your side. Consider increasing the percentage of income going towards retirement savings by 1% every year when in your 30s. Use a retirement calculator to get an idea of what it takes to save for your retirement years so you can live comfortably and enjoy the fruit of your laboring years.

In short, when you’re in your 30s, it’s time to make your money work for you so you are starting your adult life with a solid financial footing. By paying off debt, creating a savings plan and addressing insurance and investment options, you’ll be well on the way to enjoying your adult life with responsible financial habits.

If you found this article useful, be sure to check out these related articles:

Debt to Income Ratio: What it is and how it helps (or hurts) your chances of getting a loan

How I Graduated Debt-Free From College

The Imaginary Mortgage - Fake It Til You Make It



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