2016 Highlander XLE AWD Lease - MSD costs to dealer

Hey all - very helpful forum - thanks in advance.

I negotiated the following over email at a Southeast state dealership
Highlander XLE AWD
MSRP $40,724
Sales Price $36,422
Acquisition Fee $650
Miles/yr 12,000
Residual 0.68
Months 36
Money Factor 0.00124
MSD 9
Money Factor after MSD 0.00052
License/Registration Fee $91.00
Sales Tax $2,630
Down payment $-
Drive off payment $3,782
Monthly payment w/ tax $295

When I came into dealership to finalize, the Finance manager had changed the $2700 MSD fee to a down payment (ugh) and wouldn’t budge. He claimed that the MSD’s were costing the dealership 100’s or even 1000’s of dollars - how is this true? Also, any information on manufacturer to dealer lease support that is not already incorporated into promotional money factor?

Walk away, he clearly does not understand how they work.

Maybe he was hoping to bump the MF, so using MSD’s now cost him $$$ on the backend?

I agree with @Ed_Churchward, walk. If there isn’t a specific reason you’re looking at the Highlander you may be able to get away with a nicely loaded Equinox at <$200/mo and $1,070 drive off ($370 if you have costco membership). Take a look at the equinox thread.

Yes I walked - literally back to my office from the dealership - lol. I think he was disappointed that I caught him trying to sneak $2700 into the lease. Unfortunately, I have to deal with the same level of actual or faked misunderstanding about MSDs at other dealerships.

What is the MF even after they claim that you cannot put MSD? Is it the 0.00052? In this case, it is great deal, just need to negotiate the 2.7k away from sales price. Also, if 2.6k is sales tax and customer cash is 3.7k, then drive off is only 1.1k, which is not bad, so where does the 2.7k MSD appear? Is the 2.6k sales tax correct? Does FL charge tax upfront?

I would say if you hand them 3.7k cash [of which 2.6k is tax] and walk away with 295 monthly, then it is great deal, for FL (remember FL seems less competitive for Toyota).

Wow, that is crazy …

Unfort. I am not surprised. Even in the northeast, which I gather is somewhat more competitive (especially for Toyotas since we don’t have to deal in SET), I have found many dealers assume any money you are willing to commit up front (in the form of MSD) can be put down as a cap cost reduction.

I have subsequently assumed those F&I managers don’t know how to use MSD (just a few extra clicks on their PC screens) and don’t want to learn either. They figure maybe one or two out of hundreds of customers know about MSD.

Other BS lines I’ve heard include “the MF is low already, it’s not worth it.” Umm, hello, any reduction in MF, regardless of the baseline, is money saved.

re: the MF is low already - I just heard that yesterday from another dealer - they must coordinate their BS

Having difficulty getting below $37,200 on an MSRP of $40,700 while TrueCar indicates 4k is average. So I’m not sure what’s going on - there’s tons of 2016 Highlanders on the lots with 2017 arriving already - LOL

Anyone know whether the Dec numbers will be the same, better , or worse on the 2016s?

I don’t think anyone outside HQ knows what the next month’s numbers will look like (and even they presumably take inputs from a algorithmic black box that tries to predict what MF, RV, etc will show the best probability of hitting sales and profitability targets).

I’ve seen some brand-specific forums where some dealers participate and are quite forthcoming with information and I’ve never seen them ever know or pretend to know the following month’s programs.

True it is money saved but is it the best place to place your money? Let us assume the payment is 252 and the 7 MSD bring the payment to 245. So to save 7 dollars a month (or 252 total), would you “freeze” 250*7 = 1750.
I guess it depends on the time value of money.

An MSD also makes it harder to swap a lease FYI

@vhooloo on most of my leases the MSDs saved $40+/mo which translated in at least 30% return on money. I would agree with you, for a $7/mo payment i wouldn’t park 7 MSDs with the car company. Good point of lease swapping too, it makes it much more difficult to find a taker if MSDs are involved.

MSD programs differ ever so slightly between OEMs (.00007 reduction per MSD or .00008, etc) but they always save more than in your example.

Toyota’s program (.00008 per) will change a $445 payment to ~$415 with 6 MSDs ($2700).
That’s $360 per year saved by essentially storing $2,700 in Toyota Financial Svcs vs saving in your local bank or CU.

Since TFS is well capitalized and has almost 0 chance of exiting the US, the risk profile is essentially similar to a FDCI insured bank account (not comparing apples to oranges by comparing MSD savings to a theoretical stock portfolio with different risk profile).

MSD does make lease swaps a tad bit trickier, but most OEMs don’t allow lease transfers anyway. Or, if they do, they keep the original lessee on the hook, so it’s the same thing as disallowing transfers. Just BMW, M-B, Toyota and maybe a couple others allow lease transfers, and most savvy BMW and M-B lease swappers know that the best payments will require MSDs, therefore MSDs are not a barrier to them taking over leases.

1 Like

Most people overestimate their ability to make more than the 0.1% interest they are making in their savings or checking account. Unless you are an active investor and have some predictable income stream off interest, the MF reduction is going to be a better deal.

I have a “test” UBS account (my broker is probably reading/lurking here) that went up 5% in the first 2 months (that was in Jan 2015) but we spent the entire 2016 just trying to get back to what I put in on Day 1 (in addition to his 1% commission/year). It’s not that big a deal (at least for me) since I was just trying to beat 0.1% that WF was giving me :frowning: