# BMW FS - multiple security deposits and 03 rates?



## David-sFL (Sep 29, 2002)

Jon and others,

I'd like to hear your thoughts on BMW FS' program that allows you to put down up to 10 security deposits and get a lower lease rate.

I'm looking at an 03 540sport and have so far received a quote with .00265 money factor but when they figure in 9 extra security deposits that rate goes down to .00175. That's .0001 per deposit which is what they say is standard.

When you calculate the monthly savings using the lower rate it equates to 14.7% rate of return on my up front money. Or so it appears. Am I missing anything on this program? When I talk to dealers about it they say yeah you can do that but they don't seem to gung ho about it. When from my point of view it's the best way to get the monthly lease on this car to something I am confortable with.

Any comments appreciated.

Oh one more thing....do you know when the 2003 lease rates for the 5 series will be released by BMW? I understand we're (you) still working with 02 rates. The .00265 seems a bit high.

Thanks,
David


----------



## Jon Shafer (Dec 15, 2001)

David-sFL said:


> *Jon and others,
> 
> I'd like to hear your thoughts on BMW FS' program that allows you to put down up to 10 security deposits and get a lower lease rate.
> 
> ...


I think that the MSD program is a great idea, assuming
that you have the liquid funds available to utilize it.

Some of our sharpest "smart money" clients lease their
BMWs this way...

The .00265 rate is a "standard" (i.e. non sales-support) rate
that is the only rate we have available through BMWFS
at this time. When the MY2003 product arrives, expect
to see lower money factors...

Hope this helps,
--Jon


----------



## JetBlack330i (Feb 8, 2002)

I'm not familiar with that program, but common sense tells me that at 14.7% return in these days, something smells fishy. Most likely, your analysis is oversimplified. If not, everybody would be jumping on it and BMW would stop offering it.

I don't know how much one single security deposit is. Let's say it's $1K. If you have an extra $10K that you're willing to commit to a car, then I think the monthly payments that you should compare are:
a) use the $10K as down-payment and finance the rest.
b) use the $10K in multiple deposits on a lease.

Just remember that in (a) you may get some money back when you sell the car and pay-off the loan, while in (b) you get nothing (maybe a bill for over driven miles).


----------



## Jon Shafer (Dec 15, 2001)

JetBlack330i said:


> *I'm not familiar with that program, but common sense tells me that at 14.7% return in these days, something smells fishy. Most likely, your analysis is oversimplified. If not, everybody would be jumping on it and BMW would stop offering it.
> 
> *


That estimate is reasonably accurate.

Most people would jump all over it if they truly 
understood the math involved..


----------



## JetBlack330i (Feb 8, 2002)

But you are not saying that (b) is better than (a) either.

The beauty (or value add) of lease is that you don't need to tie-up any substantial amount of cash on a car.

I can understand that putting down multiple securities is better than not putting down anything. Then again, just having extra cash available is better than not having it, and this program allows one to put that extra cash to use.
Isn't this idea identical to bying points in a mortgage?
The real question is... is it better to buy points to reduce the rate or put that cash as down payment and reduce the loan amount?


----------



## Jon Shafer (Dec 15, 2001)

With the MSD program (used to its' fullest potential - 10 deposits)
the return (savings) are significant enough to construe the whole
darn thing as some sort of quasi-investment...

I gotta run for now...

Discussion to be continued...


----------



## David-sFL (Sep 29, 2002)

JetBlack330i said:


> *But you are not saying that (b) is better than (a) either.
> 
> The beauty (or value add) of lease is that you don't need to tie-up any substantial amount of cash on a car.
> 
> ...


First, thanks for both your comments.

Jetblack330i....I do believe that between option (a) and (b) that (b) is better. With the MSD program you DO get your money back at the end of the lease. Security deposits are returned barring any reason for the dealer not to (you could argue there is some amount of risk with your security deposits because there is some dealer judgement involved in whether you get it all back or not).

Your points on a mortgage example is similar in that you drive the rate down by paying extra points but you don't get all your points returned to you. You only get to write them off against your taxes.

Here's another way I'm looking at it: By using the MSD program I am able to save $88 per month between a lease with just 1 security deposit ($800) and the lease with 10 security deposits ($8000). Yes I have tied my money up for the duration of the 3 year lease, but how can I invest that money anywhere else and make $88 per month on it?

As for the 14.7 rate or return I'm still trying to figure out how the dealer came to that. I calculate closer to 13% return on my money but that's close.

David


----------



## JetBlack330i (Feb 8, 2002)

David-sFL said:


> *
> Here's another way I'm looking at it: By using the MSD program I am able to save $88 per month between a lease with just 1 security deposit ($800) and the lease with 10 security deposits ($8000). Yes I have tied my money up for the duration of the 3 year lease, but how can I invest that money anywhere else and make $88 per month on it?
> 
> As for the 14.7 rate or return I'm still trying to figure out how the dealer came to that. I calculate closer to 13% return on my money but that's close.
> ...


Still a darn good return.
So, in effect BMW is borrowing your money at 13%. If BMW needs cash, I'm sure BMW can get loans at better rates, so the question is why they are paying 13% to MSD users?
My guess is that leasing a car is risky business for BMW. One way to decrease that risk is to buy insurance. I bet insurance costs them more than 13%, so they pay 13% to you. It's a win-win for both parties. Pretty smart, whoever came out with the MSD idea.
Bottom line: given that you must lease, MSD is a no brainer.

But... if you don't absolutely need to lease then you may not be necessarily making $88 a month. You could be simply spending $88 less with MSD. It's suttle but there is a difference there.
For example, if you could avoid the lease completely, you could be spending $500 (or whatever your montly payment is) less. That doesn't mean you are making $500 a month. 
Moral: if you have cash on hand, you have options. Lease is just one of many.


----------



## David-sFL (Sep 29, 2002)

While I can agree with your logic, I don't think BMW necessarily _needs_ cash, I think they just provide the MSD program to help sell (lease) more cars. I'd also guess that by holding my extra cash they are less at risk if I happen to default on the lease, and so that's why they reduce the interest rate for you. But yes, if extra cash is on hand doing the MSD program on a lease does seem a no brainer.

No I don't have to lease, but for me it's the most (only) affordable way to drive a $50K 540i. If I took that $8000 that I could use for MSD on the lease and instead use it as a down payment on a purchase I can tell you the monthly payment would be much higher than the lease payment (around $225/mo. more for purchase and that's 36mo. lease vs. 60mo. purchase).

Thanks again for your comments. I'm certainly not trying to say the MSD and/or leasing is the way to go in all cases. It just seems attractive to me at the moment. If there are any holes in my logic I do appreciate hearing them.


----------



## roots (Sep 27, 2002)

*Re: Re: BMW FS - multiple security deposits and 03 rates?*



> _Jon Shafer wrote:_
> *
> 
> The .00265 rate is a "standard" (i.e. non sales-support) rate
> ...


Hi Jon,

Just found out that you've been hanging around on this board... that's why I don't see you on the RoadFly forum anymore :thumbup: This is Ian from SoSF (leasing a 530 on ED through Cutter).

Anyway, I'm interested in your statement above. The money factor that Franco quoted me was... shall we say, a few points higher than this rate. I learned elsewhere that .00265 was the base rate so I inquired to Franco. His response was that ED lease is "more involved" and it was reasonable to bump it up.

*Please don't get me wrong, I don't want to make a big deal out of it*, but I'm really curious if you mean that .00265 rate applies to both Euro delivered and US delivered cars.

Also you said when MY2003 arrives to expect a lower rate, since I've already signed my lease contract, am I SOL then?

Thanks,
ian


----------



## markatl (Oct 1, 2002)

*03 BMWFS Lease Rates*

Jon, it seems that the lease rates have increased over $100 per month on the updated BMW website with the 03 prices vs an equal priced 02. I thought residuals were highest early in a model year.

What is the current BMWFS residual for an 03 X5 4.4 and the standard money rate?

Thanks for your help!!!!!!!!!!!!!!


----------



## rcc (Jul 21, 2002)

Jon,

Does the .00265 figure apply to the 330i sedans as well or do they have a different figure?

And when do you think the new sales support rates will kick in for MY2003? The cars are starting to trickle in now.

Thanks.

- Ray


----------



## Jon Shafer (Dec 15, 2001)

The "standard" rates now in effect for MY 2003 BMWs is 
the only rate currently being offered (for both ED & conventional
delivery).

Lower "sales support" rates will not be announced until market
conditions call for it - that is until there is unsold MY 2003 
product on the ground, but perhaps maybe sooner...

*All* 2003 BMW models are utilizing "standard" rates
currently.


----------



## Jon Shafer (Dec 15, 2001)

*Re: Re: Re: BMW FS - multiple security deposits and 03 rates?*



roots said:


> *
> 
> Hi Jon,
> 
> ...


Hi Ian,

Glad to see that you made it over here to The 'Fest!
I want to make sure that you understand just what Franco did.
With your lease, the rent charge factor mark-up is 
_less than_ *.50%* when expressed as an A.P.R.
(not a few points)... ED leases are THE most complex 
transactions in the business. A very small profit should be 
deserved and reasonable, I hope that you'll agree...

What you may not realize is that we waived your security
deposit with with they call a "rate adder" of .00015.
We did so to save you approximately $650 in your
drive-off fees...

:thumbup:

I always work the lease this way - unless the lessee
is opting for doing the max MSD program...

Unfortunately, there is no provision for re-writing a lease
in the event that rates go down...


----------



## roots (Sep 27, 2002)

*Re: Re: Re: Re: BMW FS - multiple security deposits and 03 rates?*



Jon Shafer said:


> *
> 
> Hi Ian,
> 
> ...


Hi Jon,

Thanks for the reply! I stand corrected... I meant to say my money factor was a _few decimal digits_ higher than the standard rate. And I completely agree with you, it's no big deal given the service that you and Franco have been providing. I'm really enjoying the experience of buying from Cutter Motors and I can't wait to meet you and Franco in person! :thumbup:

Indeed I was wondering too about the security deposit but Franco told me that none was required so I'm happy.

BTW, have you got the 2003 5-series brochures? Can you possibly drop one in the mail for me when you get them please?

Thanks again!

Ian


----------



## Jon Shafer (Dec 15, 2001)

*Re: Re: Re: Re: Re: BMW FS - multiple security deposits and 03 rates?*

Hey Ian,

We haven't received any MY 2003 BMW brochures yet...
:yikes:

Hopefully we'll have them soon...


----------



## FairfaxM3 (Sep 11, 2002)

*MSD Program Details?*

Jon,

Can you please elaborate on how the MSD program works? Thanks in advance.


----------



## Jon Shafer (Dec 15, 2001)

*Re: MSD Program Details?*



FairfaxM3 said:


> *Jon,
> 
> Can you please elaborate on how the MSD program works? Thanks in advance. *


In a nutshell, you get a .0001 rate factor reduction for
each additional security deposit that you put down
up to a maximum of 9. In this scenario, you would
save .0009. Translated into an A.P.R. % , you are reducing
the cost of borrowing by 2.16%. Now, analyze the payment
savings, and consider that you get the money back at the end
of the lease, and then compare the difference between that
and if you had simply "invested" the funds elsewhere...

I am feeling a bit nostalgic today.

Can everybody see this lively thread on MSDs??

http://bimmer.roadfly.org/3series/messages/archive/msgsy2001w22/34143.html


----------



## David-sFL (Sep 29, 2002)

Jon,

I applaud your clear and concise explanations. You confirm my understanding of MSD, just much better.

And the point is clear too....in my original question to this thread I describe a lease where MSD is saving me $88 per month with no risk since I will get all the MSD $ back at the end of the lease. Again, where else can I invest that money now and get the same return. Maybe some places but with very high risk.

It's funny how the people in the thread from bimmer.org just don't get it!!


----------



## DCC (Apr 16, 2002)

David,

can you post the amount of each security deposit and the '03 540 residual for 36mths (12K?/yr)?

Thanks

Daniel


----------



## Jason B (Apr 13, 2002)

David-sFL said:


> *Jon,
> 
> I applaud your clear and concise explanations. You confirm my understanding of MSD, just much better.
> 
> ...


Just wanted to say hello to a fellow neighbor. Where are you buying your car from?


----------



## David-sFL (Sep 29, 2002)

DCC said:


> *David,
> 
> can you post the amount of each security deposit and the '03 540 residual for 36mths (12K?/yr)?
> 
> ...


Sure. I'm basically weighing the difference of one security deposit ($800) vs. 9 extra deposits ($7200).

With one deposit the monthly is $854. With 10 deposits (full MSD participation) the monthly is $765.

36mo, 12K miles, residual = 62%.

One thing I'm not entirely clear about (and hoping JON will answer) is what determines the amount of the 1st security deposit...ie, why did this dealer's quote use an security deposit of $800? Is it arbitrary and up to the dealer?

Thanks, David


----------



## David-sFL (Sep 29, 2002)

Jason B said:


> *
> 
> Just wanted to say hello to a fellow neighbor. Where are you buying your car from? *


Hey jason, I'm in boca too.

I bought my current car (328i) from Vista but now I'm trying (and preferring) to work with Braman in west palm bch but I should try some of the other local dealers too since there are many in south FL.

Why switch? Vista never gave me any incentive to go back to them, in fact my lease is up and 2 weeks and they have never even called me to see if I wanted to stay with a BMW. And so now I'm looking at 540i's.

Interested in your preference or comments.

David


----------



## LilEccentricJ (Dec 19, 2001)

David-sFL said:


> *
> 
> Interested in your preference or comments.
> 
> David *


Well save yourself a trip and skip Coggin in Ft. Pierce... It's a long story but trust me. .02


----------



## DCC (Apr 16, 2002)

Thanks David,

I think the security deposit is tied in with the monthly payment amount somehow
I am working on a 36mths 10K/yr MSD deal...but dealer does not have a generous allocation at the moment
I might wait alittle (christmas) to make the deal for a 2/03 delivery

Keep me posted if you find out more

Daniel


----------



## DCC (Apr 16, 2002)

Jon,

does this MSD formula apply to leases only or to owner's choice (or whatever that new program is)?

Dan


----------



## Jon Shafer (Dec 15, 2001)

DCC said:


> *Jon,
> 
> does this MSD formula apply to leases only or to owner's choice (or whatever that new program is)?
> 
> Dan *


Applies to true leases only...


----------



## Jason B (Apr 13, 2002)

David-sFL said:


> *
> 
> Hey jason, I'm in boca too.
> 
> ...


My parents bought their X5 from Braman in Palm Beach and I got my 330i from Vista. Both leave somethiing to be desired. Don't think one is better than the other. Vista gave me the best price and didn't try to screw me on the money factor like Braman. Lauderdale Imports would not even give me a price when I told her I was looking for 1k over invoice. I was getting *GREAT* service from Braman until Christine Robinson left. The new jack-off there sucks.

If your sales person is no longer at Vista that is probably why you did not get a call. If he/she is still there I would get a different person. Vista is moving in December to Sample and Lyons so they will very close.


----------



## Jason B (Apr 13, 2002)

LilEccentricJ said:


> *
> 
> Well save yourself a trip and skip Coggin in Ft. Pierce... It's a long story but trust me. .02 *


You never filled me in on what happened. Didn't they trash your rims and break the door handle?


----------



## LilEccentricJ (Dec 19, 2001)

Jason B said:


> *
> 
> You never filled me in on what happened. Didn't they trash your rims and break the door handle? *


Yes sir, they did.

I have a post in General.. looking for a recommendation on a service advisor at braman.. they have like 6 of them.. can you request one or do they pool you in? I need a good person that cares about our cars to win me back to BMW.. I'm so close to looking into the E500 or CLK500 and want one last stab at getting this car right first.


----------



## David-sFL (Sep 29, 2002)

Jason B said:


> *
> 
> I was getting GREAT service from Braman until Christine Robinson left. The new jack-off there sucks.
> 
> If your sales person is no longer at Vista that is probably why you did not get a call. If he/she is still there I would get a different person. Vista is moving in December to Sample and Lyons so they will very close. *


Jason,
Who is Christine, was she the service director, manager, or just one of the advisors?

Funny thing is that the salesguy *is* still at Vista. Back in 2000 when I leased my current car they said they were moving to sample and lyons.....is December definate now?


----------



## David-sFL (Sep 29, 2002)

Jason B said:


> *
> 
> I was getting GREAT service from Braman until Christine Robinson left. The new jack-off there sucks.
> 
> If your sales person is no longer at Vista that is probably why you did not get a call. If he/she is still there I would get a different person. Vista is moving in December to Sample and Lyons so they will very close. *


Jason,
Who is Christine, was she the service director, manager, or just one of the advisors?

Funny thing is that the salesguy *is* still at Vista. Back in 2000 when I leased my current car they said they were moving to sample and lyons.....is December definate now?


----------



## Jon Shafer (Dec 15, 2001)

Somebody was asking about the MSD program again?


----------



## SteveMD (Apr 22, 2002)

Jon Shafer said:


> *Somebody was asking about the MSD program again?
> *


Hi, Jon. Yes, it's me asking and helping get this thread off FL dealers and back on track. 

If the car gets totaled does the person leasing it get back the security deposit?


----------



## Jon Shafer (Dec 15, 2001)

SteveMD said:


> *If the car gets totaled does the person leasing it get back the security deposit? *


Yep, yep, yep!

You've got your regular ole car insurance _and_ 
you've got "Gap Insurance" to cover any defficiencies...

You get all yo money back!


----------



## nickdtm (Mar 23, 2003)

Is the security deposit price based upon monthly payment cost?

Thanks


----------



## Jon Shafer (Dec 15, 2001)

nickdtm said:


> *Is the security deposit price based upon monthly payment cost?
> 
> Thanks  *


Yes, SD amount is based on the payment, rounded up
to the nearest $50 increment.


----------

