# MSD Lease option



## Victor5 (Oct 9, 2008)

hihi all,

is the Multiple Security Deposits all paid up-front at the time of delivery (pick-up)? or is it paid at equally divided times throughout the lease term?

thanks in advance,
-v


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## philippek (Jul 31, 2003)

Paid up-front, at the time of contracting, at the very latest 1 week prior to taking delivery in Munich.


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## Victor5 (Oct 9, 2008)

ok thanks, i was hoping for the other answer, lol


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## aeroschwany (Oct 16, 2008)

Victor5 said:


> ok thanks, i was hoping for the other answer, lol


Is MSD really worth it? It lowers the MF on the lease, but wouldn't we be better off putting the money into an interest bearing account or a CD? I know the money is fully refundable, but you don't earn any interest on it. It seems crazy. Maybe I'm wrong... I'm certainly open to a pro MSD argument; in fact, I'd love to hear the argument for it.

:dunno:


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## tturedraider (Nov 11, 2005)

aeroschwany said:


> Is MSD really worth it? It lowers the MF on the lease, but wouldn't we be better off putting the money into an interest bearing account or a CD? I know the money is fully refundable, but you don't earn any interest on it. It seems crazy. Maybe I'm wrong... I'm certainly open to a pro MSD argument; in fact, I'd love to hear the argument for it.
> 
> :dunno:


Read this - http://www.bimmerfest.com/forums/showthread.php?t=134206 - and do a little searching and reading in the Ask-a-Dealer forum and you'll find literally dozens and dozens of pro-MSD arguments.

Using maximum MSDs to reduce the lease MF generally yeilds between 8% - 10% return on the funds as compared to not doing MSDs and paying the money up front as a Cap-cost reduction or putting the funds into some other investement vehicle. The return on investment comes from the amount MSDs lower the MF and the corresponding reduction in interest you pay on the lease. If you have an investment vehicle that gives a guaranteed return exceeding 8% - 10% then it would make sense to use that.


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## Robert A (May 18, 2003)

It's simple: Compute your lease both ways. Take the difference of 12 payments and divide that figure into the extra lease deposits. In my case, the return was greater than 12% per year so it was a no brainer.



aeroschwany said:


> Is MSD really worth it? It lowers the MF on the lease, but wouldn't we be better off putting the money into an interest bearing account or a CD? I know the money is fully refundable, but you don't earn any interest on it. It seems crazy. Maybe I'm wrong... I'm certainly open to a pro MSD argument; in fact, I'd love to hear the argument for it.
> 
> :dunno:


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## mclaren (Jan 5, 2005)

aeroschwany said:


> Is MSD really worth it? It lowers the MF on the lease, but wouldn't we be better off putting the money into an interest bearing account or a CD? I know the money is fully refundable, but you don't earn any interest on it. It seems crazy. Maybe I'm wrong... I'm certainly open to a pro MSD argument; in fact, I'd love to hear the argument for it.
> 
> :dunno:


There is absolutely no doubt that MSDs give you a return, through saving on the lease payment, that can't be beat or equaled by any investment that does not involve substantial risk. Also, the money you save is not taxed and you save sales tax on the lease payment in most states. If you don't mind tying up the money they are a no brainer.


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## jags86 (Oct 19, 2008)

Are the MSDs based on a pre or post tax monthly payment?


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## mclaren (Jan 5, 2005)

The money factor is lowered so the interest charge is lower and hence the payment. Then the tax is applied to the lower payment.


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## jags86 (Oct 19, 2008)

Edit:

I should say, is a security deposit based on a pre-tax monthly payment or a post tax monthly payment?


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## mclaren (Jan 5, 2005)

Post tax rounded up to the nearest $50. So $528 = $550. So if the payment was $555 including tax it would be smart to do a small cap reduction to get the payment to $550.


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## aeroschwany (Oct 16, 2008)

Interesting. Thanks for all the information.


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## BigMoneyWasted (Oct 30, 2008)

Robert A said:


> It's simple: Compute your lease both ways. Take the difference of 12 payments and divide that figure into the extra lease deposits. In my case, the return was greater than 12% per year so it was a no brainer.


This is exactly what I had the BMW finance guy do when I went in yesterday to lease my Z4. Paying 7 deposits for a total of $2800 reduced my total three year payment by $1100. So unless I can invest 2800 and get 366 (about 13.1% APR whout compounding) this was truly a no brainer. Plus I now have a really low montly lease payment of $337/m.


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## mclaren (Jan 5, 2005)

BigMoneyWasted said:


> This is exactly what I had the BMW finance guy do when I went in yesterday to lease my Z4. Paying 7 deposits for a total of $2800 reduced my total three year payment by $1100. So unless I can invest 2800 and get 366 (about 13.1% APR whout compounding) this was truly a no brainer. Plus I now have a really low montly lease payment of $337/m.


If the lease payment AFTER MSDs is $337 including tax the MSDs would be $350 or $2450 not $2800. If the $337 does not include tax you might look at a small cap reduction to get the payment to $350.


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## Johnny Lee (Feb 5, 2008)

The msd is a good way to reduce your payment and you do save money in a long run HOWEVER, if you car got stolen or totaled you lost all the msd. So it really has a pro and a con in it. For me, I prefer nothing down.


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## jvslyke (Dec 4, 2007)

Johnny Lee said:


> The msd is a good way to reduce your payment and you do save money in a long run HOWEVER, if you car got stolen or totaled you lost all the msd. So it really has a pro and a con in it. For me, I prefer nothing down.


from what I've read it doesn't look like you lose the MSD's if the car is lost or stolen unless I'm really offbase. :dunno:

Check this out: http://www.bimmerfest.com/forums/showthread.php?t=23208&highlight=msd+stolen


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## BigMoneyWasted (Oct 30, 2008)

Johnny Lee said:


> The msd is a good way to reduce your payment and you do save money in a long run HOWEVER, if you car got stolen or totaled you lost all the msd. So it really has a pro and a con in it. For me, I prefer nothing down.


 That's a bit like saying the landlord does not refund your security deposit if your apartment is destroyed by lightning. There is no court in the land that would side with the landlord. Similarly, a security deposit is always refunded, except for damages for which the tenant (and in this case the driver) is directly responsible.


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