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Discussion Starter · #1 ·
Spoke with a dealer today and got the skinny on multiple security deposits.

Looks like it will make about an $80/mo difference in current lease rate by maxing out the MSD.

Looks like .00001 reduction for each MSD (one month base lease payment without taxes).

It's a hefty chunk of change but I'm seeing people put a lot down on leases to get their payments lower and this is a much better deal. I don't think you could get that type of return on your money right now and it gets the payments pretty much where I want them.

I have to get the written info but I've done these on my wife's Lexus and after our lease turn in we got a nice check back. They hold the money, do what they want with it and then give it back at lease end.

It's better than a cap reduction because if you total the car, the gap coverage covers the lease and you still get your check back,

If you haven't explored this option it might be worth a look.

I think the lease rate the dealer used was .0014 (thought I saw a .00134 posted elsewhere so I have to look into that) but with the MSD it drops the money factor to .0005.

Just wanted to throw that out there as a consideration for people.
 

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Thanks for the info ... I wish you would have posted that in the official lease deal thread as well to try and keep all the lease info together...
 

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Discussion Starter · #3 ·
Easy to copy and paste :) I'll do that now.
 

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I'm not sure I totally understand that MSD concept, but definitely will discuss with the dealer when my Q arrives. Thanks so much! :)
 

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Discussion Starter · #5 · (Edited)
I'm not sure I totally understand that MSD concept, but definitely will discuss with the dealer when my Q arrives. Thanks so much! :)
Basically, instead of putting money down on your lease to lower your payment by 'prepaying' some of the lease amount, you give Infiniti a chunk of money to hold onto and use for the term of your lease. They can use that money for whatever they want and it lowers their risk since they can apply the money to unpaid lease payments if you don't pay for some reason, my understanding is they can also apply it toward repairs at turn in if there are any.

An example would be to compare most of the lease offers you see advertised. A lot of them require $4999 out of pocket. Much of that is used to reduce your cap cost - what you are paying for the car with a 'down payment'. So if the dealer sells you the car for MSRP - let's just say $50,000 but you want a payment that is lower, you can pay some of your lease up front in the form of the cap cost reduction. So with this lease deal example (totally made up by the way!) lets say $3500 goes toward reducing your capital cost. Now your payment will be about $110 lower per month compared to not putting any money 'down'. However, since a lease is basically just paying for the depreciation on the car for the term of your lease plus interest for that time, you are basically prepaying your depreciation to get your payment lower.

Most people do not recommend this on a lease because you can lose that money if you total the car or it gets stolen. Since its prepaid, your are out that money and it doesn't get returned.

The difference with MSD (multiple security deposits) is that you are giving Infiniti the money to hold on your behalf - sort of like your security deposit on an apartment. At the end of the lease you get that money back - minus anything they might apply for repairs at lease turn in.

I'm waiting to get clarification from Infiniti about the return of the funds in the event of a total loss but I can't imagine they would be any different than other companies in this regard and the dealer confirmed so I'm going in that premise for now.

So by giving the money to Infiniti to use for the term of your lease you are helping them finance growth very inexpensively. They like having the money to hold onto. In return, they give you a reduction in the money factor of your lease which lowers your payment.

So instead of putting money 'down' and risking the loss of that money, you can give MSD's and not have that risk but still enjoy lower payments.

So if the money factor used for a lease (basically the interest rate/2400) is .0014 right now and you give them 9 MSD's (9 months of your base payment before any monthly taxes if you have them in your state) which is the maximum, you would get a discounted money factor that looks like the following:

.0001 (reduction in MF for each month of MSD made)
X 9 (months worth of MSD)
=.00009 reduction in money factor

.0014. Current MF
- .00009 discount for MSD's
= .0005. New adjusted MF

That drop in MF can make a pretty significant change in your payment but you get your money back at the end of the lease. Not a bad place to park your money for a few years. Much better than a savings account these days.

In my case the reduction in MF by maxing out the MSD's seems worthwhile. If someone is thinking about putting money down on a lease, this is a great option to consider.

Going a full 9 months with your MSD plus tax, tags, title etc can be a pretty good chunk of money upfront but considering you get most of that back at the end it makes it easier to swallow. I think the amount of money needed out of pocket to get a similar payment by buying down the cap cost was only about $1500 difference so make sure to compare out the differences. And I would never out that much down on a lease as a cap cost reduction!

Not for everyone but worth considering if you are able to do it.

Hope that helps!
 
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thanks for that info, its very helpfup. Also another note to add: not all states allow you to do MSD. NY being one of them.

And to answer your question, yes you do get the money back, full amount if you total your car.
 

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Are you saying that we should roll the tax title license into the cost, or pay the tax, title, license up front, in addition to the 9 MSD's?
 

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Basically, instead of putting money down on your lease to lower your payment by 'prepaying' some of the lease amount, you give Infiniti a chunk of money to hold onto and use for the term of your lease. They can use that money for whatever they want and it lowers their risk since they can apply the money to unpaid lease payments if you don't pay for some reason, my understanding is they can also apply it toward repairs at turn in if there are any.

An example would be to compare most of the lease offers you see advertised. A lot of them require $4999 out of pocket. Much of that is used to reduce your cap cost - what you are paying for the car with a 'down payment'. So if the dealer sells you the car for MSRP - let's just say $50,000 but you want a payment that is lower, you can pay some of your lease up front in the form of the cap cost reduction. So with this lease deal example (totally made up by the way!) lets say $3500 goes toward reducing your capital cost. Now your payment will be about $110 lower per month compared to not putting any money 'down'. However, since a lease is basically just paying for the depreciation on the car for the term of your lease plus interest for that time, you are basically prepaying your depreciation to get your payment lower.

Most people do not recommend this on a lease because you can lose that money if you total the car or it gets stolen. Since its prepaid, your are out that money and it doesn't get returned.

The difference with MSD (multiple security deposits) is that you are giving Infiniti the money to hold on your behalf - sort of like your security deposit on an apartment. At the end of the lease you get that money back - minus anything they might apply for repairs at lease turn in.

I'm waiting to get clarification from Infiniti about the return of the funds in the event of a total loss but I can't imagine they would be any different than other companies in this regard and the dealer confirmed so I'm going in that premise for now.

So by giving the money to Infiniti to use for the term of your lease you are helping them finance growth very inexpensively. They like having the money to hold onto. In return, they give you a reduction in the money factor of your lease which lowers your payment.

So instead of putting money 'down' and risking the loss of that money, you can give MSD's and not have that risk but still enjoy lower payments.

So if the money factor used for a lease (basically the interest rate/2400) is .0014 right now and you give them 9 MSD's (9 months of your base payment before any monthly taxes if you have them in your state) which is the maximum, you would get a discounted money factor that looks like the following:

.0001 (reduction in MF for each month of MSD made)
X 9 (months worth of MSD)
=.00009 reduction in money factor

.0014. Current MF
- .00009 discount for MSD's
= .0005. New adjusted MF

That drop in MF can make a pretty significant change in your payment but you get your money back at the end of the lease. Not a bad place to park your money for a few years. Much better than a savings account these days.

In my case the reduction in MF by maxing out the MSD's seems worthwhile. If someone is thinking about putting money down on a lease, this is a great option to consider.

Going a full 9 months with your MSD plus tax, tags, title etc can be a pretty good chunk of money upfront but considering you get most of that back at the end it makes it easier to swallow. I think the amount of money needed out of pocket to get a similar payment by buying down the cap cost was only about $1500 difference so make sure to compare out the differences. And I would never out that much down on a lease as a cap cost reduction!

Not for everyone but worth considering if you are able to do it.

Hope that helps!
Thanks! That explained well! and I think I will want to do that for sure! -- The only question I have is whether we have a saying at the end of the lease term how much they should give us back from this MSD? (In theory, the dealer could say "you need to pay for this this and this" and before I know it I only get a much smaller amount back?) I might be assuming the worst, but that's my question if it's totally in THEIR control ...?

Great information, jkay, thank you!!
 

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You will get your MSDs back in full at the end of the lease. Infiniti financial services will refund it, the dealer has nothing to do with it. Basically you are securing a lower interest rate (money factor).

My father did it with Lexus last month, it is in effect a 25% return on your deposit in 3 years. They only allowed him 7 X monthly lease payments on a GS350.
 

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Discussion Starter · #12 ·
Don't do it if you are planning to default on the lease :)
Good point!! But I would probably go a step further and tell someone not to lease the car if they plan to default :D

Good point about some states not allowing the MSD. Not sure which ones but make sure to check.

I did this on my wife's last Lexus lease and we got a check back from Lexus a few weeks after we returned the car.

I don't think they will nitpick repair items any more than usual. That's a pretty cynical thought but not out of the realm of possibility. Usually the inspectors are 3rd party and probably don't even know if someone gave MSD's.
 

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The MSDs are a really sweet deal if you have some cash to park. In my case the max MSDs is 9, which reduces the monthly payment about $82. 9 MSDs in my case is $6300. So annual savings in monthly payments is $82 x 12 or $984/yr. $984 divided by $6300 is 15.6% return on investment. Definitely better than I can get with that money sitting in a bank.
 

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Discussion Starter · #15 ·
That's close to my math too.

Seems like a no brainer if your state allows it and you have the funds.

Some people are willing to actually put close to that much money down on a lease so for not much more your money is protected so you don't lose it if there is a total loss on the car. Money up front on a lease is never a good idea - MSD with that kind of a return makes much more sense.

Makes the payments much better.

Glad it might work for you.
 

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Pretty much have to ask the dealer about it. I think it is over some people's head and clearly requires extra funds but the dealers are all aware of it and should be able to run the numbers for you. Even a couple MSDs can make a difference in your payments.
 

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Hmm, seems like a new concept to quite a few of us. Definitely a consideration. Thanx for the detailed explanation, jkay.


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Discussion Starter · #19 ·
Anytime, I learned about it with my wife's Lexus. I was trying to negotiate a ridiculously low lease payment ( trying to get $5 G's off the selling price:) ) and the dealer said the only way I could get that payment was with $5,000 cap reduction. I told him he was nuts and he came up with the MSD option. It worked great and we got a check for $5k a few weeks after we traded the car in(had some equity at the end so the dealer bought it so we didn't have to deal with a front bumper repair compliments of wifey and a garage door).

Infinit and Lexus work the same as far as I can tell. They take the .0001 off of the offered rate.

I looked at the Mercedes E class a few weeks ago and they don't apply the MSD to their incentive rate - just the normal rate so it didn't make sense. (Their normal lease rate is in the 5's and their incentive rate is in the 3's. they only apply the MSD to the higher rate so it would end up in the 3's and close to the incentive rate so it didn't make any sense to consider it).

Even looking at a few months and not maxing out the MSD's might make sense for some folks. The lease specials usually run about $2999 in cap reduction so the 4 months MSD may come close to those payments. Either way, it's worth the look!
 

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Pretty much have to ask the dealer about it. I think it is over some people's head and clearly requires extra funds but the dealers are all aware of it and should be able to run the numbers for you. Even a couple MSDs can make a difference in your payments.
same numbers for me...what a great roi! and I'll be doing this for my lease
 
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