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BMW 3-Series (E90 E92) Forum > BMW E90/E92/E93 3-series General Forums > New & Preowned BMW Ordering / Pricing / Tracking Information Forum (including European Delivery) > Does money down on a lease even make sense?



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      03-16-2009, 02:29 PM   #23
Paddy
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Originally Posted by MyE92 View Post
Can someone explain how the no down payment/multiple security deposits work? I know there are some people out there who didnt put a down payment, but they did multiple security deposits instead.
MSD's are "refundable" security deposits that you pay up front. Basically a single MSD costs your monthly lease payment rounded up to nearest $50. ($401 becomes $450, $449 becomes $450).
For each MSD you place you reduce the Money Factor (MF) by 0.0007. I believe for returning lease customers, a max of 7 MSD's can be used for a total MSD reduction of 0.0049.

FYI: MF is another way to describe the interest rate. Real Interest rate=MF*2400, so .0025MF=6%

So Assuming a 335i lease rate MF of .0025, with 7MSD's it will reduce to .00201
6%-->4.8%

Generally the return of putting down MSD's in terms of interest saved on the lease is better than one would normally make if you took the total cash for 7 MSD's and invested in bank/CDs. So most people consider MSD's a no brainer.

A new customer can do a max of 8 MSD's. The first one is required (generally) to get the posted MF and does not count towards MF reduction. Returning customers do not need to pay this and thus are maxed at 7MSD's.

On lease return (well some time reasonably shortly afterwards) BMWFS will refund the MSD's you paid OR they may put them towards excess mileage or excessive wear/tear on the vehicle at lease return. I haven't heard of this happening to anyone, but I'm sure there are cases. Generally if you are moving into another BMW lease they are pretty lenient at lease return.

Beware, many dealers are not used to doing MSD's and they may try and tell you that you can't do them or that they don't apply to the advertised BMWFS MF rate. Stick to your guns and they will eventually come around.

The MF cannot be reduced below 0.00011, which generally shouldn't be an issue for you unless you get a ridiculously low MF on special offer.
As an example, I just snagged an 08 M3 which had a crazy low MF special offer from BMWFS. I could only put down 2 MSD's because I hit the min rate with those 2 MSD's.
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      03-16-2009, 07:53 PM   #24
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padddy what do you mean by"Depending on your particular circumstances you may or may not recover any down payment".



Are you saying that someone could get their down payment returned? What would those circumstances be? I am getting ready to return my lease and put a good size down payment and am wondering?

Last edited by EZgoE90; 03-16-2009 at 08:12 PM.
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      03-16-2009, 10:40 PM   #25
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Quote:
Originally Posted by Paddy View Post
MSD's are "refundable" security deposits that you pay up front. Basically a single MSD costs your monthly lease payment rounded up to nearest $50. ($401 becomes $450, $449 becomes $450).
For each MSD you place you reduce the Money Factor (MF) by 0.0007. I believe for returning lease customers, a max of 7 MSD's can be used for a total MSD reduction of 0.0049.

FYI: MF is another way to describe the interest rate. Real Interest rate=MF*2400, so .0025MF=6%

So Assuming a 335i lease rate MF of .0025, with 7MSD's it will reduce to .00201
6%-->4.8%

Generally the return of putting down MSD's in terms of interest saved on the lease is better than one would normally make if you took the total cash for 7 MSD's and invested in bank/CDs. So most people consider MSD's a no brainer.

A new customer can do a max of 8 MSD's. The first one is required (generally) to get the posted MF and does not count towards MF reduction. Returning customers do not need to pay this and thus are maxed at 7MSD's.

On lease return (well some time reasonably shortly afterwards) BMWFS will refund the MSD's you paid OR they may put them towards excess mileage or excessive wear/tear on the vehicle at lease return. I haven't heard of this happening to anyone, but I'm sure there are cases. Generally if you are moving into another BMW lease they are pretty lenient at lease return.

Beware, many dealers are not used to doing MSD's and they may try and tell you that you can't do them or that they don't apply to the advertised BMWFS MF rate. Stick to your guns and they will eventually come around.

The MF cannot be reduced below 0.00011, which generally shouldn't be an issue for you unless you get a ridiculously low MF on special offer.
As an example, I just snagged an 08 M3 which had a crazy low MF special offer from BMWFS. I could only put down 2 MSD's because I hit the min rate with those 2 MSD's.
Wow! Thanks for the info...
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      03-16-2009, 11:41 PM   #26
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Quote:
Originally Posted by EZgoE90 View Post
padddy what do you mean by"Depending on your particular circumstances you may or may not recover any down payment".



Are you saying that someone could get their down payment returned? What would those circumstances be? I am getting ready to return my lease and put a good size down payment and am wondering?
Say you lease a 60K car for 3 years, residual 50%. (Very general numbers here)
Option A: 10K down. 20K financed over 3 years. Monthly payment $700
Option B: 0 Down, 30K financed over 3 years, Monthly $920

Now say you went Option A and totalled the car after 1 day.
Your insurance company will basically replace your car with a new car, which will be option B, what you would have paid if you had not put anything down.

The further you get along in your lease, the less of your downpayment you lose, because the monthly savings made possible by the original downpayment, in effect add up. So "depending on your circumstances" basically means depending on how much down and how long into the lease before car gets totalled.
The insurance company pays the current value of the vehicle most of which goes to BMWFS, you will get any left over which may cover some of your original downpayment but unlikely.
If you get totalled on the last day of the lease, then you basically get nothing, BMWFS will get everything, but that's fine because your downpayment was used to its fullest and you have lost none of it.

That's my understanding of the downpayment danger concept, I could be off base though.
It boils down to how much risk you are willing to take to save a relatively small amount of money (more down=more saved). Putting 10K down on a 60K vehicle saves about $1,100 in interest over the 3 year loan.

You still pay sales tax on downpayments, so what you save by making a downpayment is the interest charge you would pay to BMWFS to finance that amount.

Last edited by Paddy; 03-17-2009 at 12:05 AM.
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      04-14-2013, 10:25 AM   #27
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I know this is an old thread but it's been bugging me lately. Instead of giving 10k down, why wouldn't you instead give the 10k down on your first payment. This way you don't have a car payment for 10 months.
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      04-14-2013, 10:33 AM   #28
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Quote:
Originally Posted by shockin330i View Post
I know this is an old thread but it's been bugging me lately. Instead of giving 10k down, why wouldn't you instead give the 10k down on your first payment. This way you don't have a car payment for 10 months.
Your interest is calculated off the value of the price you purchased at. If you bring that value down with a 10K downpayment, your interest of whatever X% is now on for example $40k instead of the previous $50k.

If you pay $10k on a loan for $50k, you're still getting higher $ amount in interest tacked on that was associated with $50k loan.
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      04-14-2013, 12:18 PM   #29
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You're talking about 500 bucks difference over the length of the term.
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