[Neem320]

I found this info on a Infiniti forum while searching lease info. It should be pretty useful for people like me who aren't very knowledgeable on leases.

I was asked about leases, and how MSDs work; (and I couldn't fit my response in a PM, so I'm doing a post). I learned stuff from this link and this post by go4gr8:
So, for now I've ignored taxes and fees, which factor into this. But the concepts are the same.

MSRP: This is the sticker cost of the car, this is what's on the window when you go to the dealership. Let's say $30,000

Price: This is the negotiated price of your car. Let's say $25,000

Residual Value: This tells you what the company thinks your car will be worth at the end of your lease. Let's say 60%. This means the car would be worth $18,000 at the end of your lease.

Money Factor (MF): A way of representing the interest you pay on your lease. The tricky thing about MF, is that it's expressed as decimal that is NOT the actual interest you're paying. The interest you pay is MF x 2400. Lets say your MF was 0.00189; the interest you're paying is actually 4.536% [this is semi-accurate guess, the actual value will be slightly off]

You pay interest on the Price ($25,000) AND the "loan" which is the Price - Residual Value ($30,000 - $18,000 = $12,000). So you're going to be paying interest on $25,000 + $12,000 = $37,000.

Multiple Security Deposit (MSDs). Each MSD is the size of your monthly payment rounded up to the closest $50. So if your payment is $260, each MSD would be $300

Now, for each MSD you give the financing company (at Infiniti) your MF goes down by 0.0001. Which saves you about %0.24 on the interest. Which is actually pretty good. Cool thing about MSDs are that they are that they make your monthly payments less AND at the end of your lease, you get the money back!

Infiniti lets you put down a maximum of 9 MSDs (which would cost 9 x $300 = $2,700), your MF goes from 0.00189 to 0.00099. Which means you would save 2.16% in interest (which is a lot of money on $37,000)

MSDs are not down payments! Down payments is paying part of your "loan" off, so if you used that $3,150 as a down payment; your loan would go down from $37,000 to $34,300. But paying 4.536% interest on $34,300 is more than paying 2.16% interest on $37,000.

In this example, you would save $1,500 if you didn't put any money down. Compared to a savings of $200 if you put that $2,700 down (instead of MSDs) [edit: The savings is $200 when you put $2700 down, not $1300! Had to clarify the language here].

I'm adding an excel sheet where you can play around with the numbers: Blue numbers are ones you edit, Red numbers are the ones that matter for comparing payment methods. Download the excel sheet HERE


[For you number geeks, using simple future value, compound interest calculations: You save $1,500 by using $2,700 on MSDs. If instead you put those $2,700 into a bank account, to gain (savings of) $1,500 after 3 years (to total $4,200), the bank would have to give you interest of 15%/year . That's pretty good in my books!]

[kube]

Originally Posted by Neem320

I found this info on a Infiniti forum while searching lease info. It should be pretty useful for people like me who aren't very knowledgeable on leases.

I was asked about leases, and how MSDs work; (and I couldn't fit my response in a PM, so I'm doing a post). I learned stuff from this link and this post by go4gr8:
So, for now I've ignored taxes and fees, which factor into this. But the concepts are the same.

MSRP: This is the sticker cost of the car, this is what's on the window when you go to the dealership. Let's say $30,000

Price: This is the negotiated price of your car. Let's say $25,000

Residual Value: This tells you what the company thinks your car will be worth at the end of your lease. Let's say 60%. This means the car would be worth $18,000 at the end of your lease.

Money Factor (MF): A way of representing the interest you pay on your lease. The tricky thing about MF, is that it's expressed as decimal that is NOT the actual interest you're paying. The interest you pay is MF x 2400. Lets say your MF was 0.00189; the interest you're paying is actually 4.536% [this is semi-accurate guess, the actual value will be slightly off]

You pay interest on the Price ($25,000) AND the "loan" which is the Price - Residual Value ($30,000 - $18,000 = $12,000). So you're going to be paying interest on $25,000 + $12,000 = $37,000.

Multiple Security Deposit (MSDs). Each MSD is the size of your monthly payment rounded up to the closest $50. So if your payment is $260, each MSD would be $300

Now, for each MSD you give the financing company (at Infiniti) your MF goes down by 0.0001. Which saves you about %0.24 on the interest. Which is actually pretty good. Cool thing about MSDs are that they are that they make your monthly payments less AND at the end of your lease, you get the money back!

Infiniti lets you put down a maximum of 9 MSDs (which would cost 9 x $300 = $2,700), your MF goes from 0.00189 to 0.00099. Which means you would save 2.16% in interest (which is a lot of money on $37,000)

MSDs are not down payments! Down payments is paying part of your "loan" off, so if you used that $3,150 as a down payment; your loan would go down from $37,000 to $34,300. But paying 4.536% interest on $34,300 is more than paying 2.16% interest on $37,000.

In this example, you would save $1,500 if you didn't put any money down. Compared to a savings of $200 if you put that $2,700 down (instead of MSDs) [edit: The savings is $200 when you put $2700 down, not $1300! Had to clarify the language here].

I'm adding an excel sheet where you can play around with the numbers: Blue numbers are ones you edit, Red numbers are the ones that matter for comparing payment methods. Download the excel sheet HERE


[For you number geeks, using simple future value, compound interest calculations: You save $1,500 by using $2,700 on MSDs. If instead you put those $2,700 into a bank account, to gain (savings of) $1,500 after 3 years (to total $4,200), the bank would have to give you interest of 15%/year . That's pretty good in my books!]

Great idea, but from your tagline it looks like you're also from New York, and for us New Yorker's, we can't do MSDs -- I tried on my last lease and was told by my CA that BMW FS won't allow. I've read on some other boards that if you go out of state you may be able to do this (like NJ), but then you have to jump through all sorts of hoops and register the car and take care of all the state taxation paperwork -- and some dealers won't do it as I was told that BMW FS knows the rules and gives them grief.

Best we can do is *not* pay the sales tax upfront. If something happens to the car, gap insurance covers the remaining lease payments, but you don't get the pre-paid sales tax back. Plus I hate giving NYS anything in advance. Bad enough I have to pre-pay for 2 years of a car registration.

.