It’s usually thousands that earn no interest or provide other investment uses except to lower payment. Is the only consideration a financial calculus?
They usually represent a very high guaranteed rate of return.
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In the form of lower payment. There nothing else to it, correct.
Correct. Youd need to compare investment options, including taxes and such, to determine what a better use of your money would be.
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Got it, thanks. Is there a typical amount it lowers payment by? Also, how does the onepay component figure into the equation?
The amount varies by bank/brand.
One pays behave similarly in that you save money by them reducing the money factor. You cant do a one pay and msds concurrently though.
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Hmmm very interesting. So one would have to “run the numbers” to see if onepay v MSD is better. Is one usually the better option?
Usually a one pay is better, but it can vary by brand
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Thank you. I truly appreciate all your help.
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Usual the rate of return has been around 10-15% risk free.
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A recent lexus lease we did saved $51 per month so $1836 over the life of the lease with $5400 in MSDs. So that is a 34% risk free return over 3 years.
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Let’s wargame it out for OP!
Volvo Example lease, random numbers but only difference is MSDs vs no MSDs
MSDs
Total lease cost of 20210
No MSDs
Total lease cost of 21590
MSDs cost $5500, 21590-20210 = 1380.
1380/5500 = 25% / 3 years = Annual Rate of Return of over 8%. Guaranteed, tax free savings, yes you might get better returns in the market, but this is a nice way to put a little bit of money away and get a nice high single-digit ROI.
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Not really apples to apples comparison with percents and investing bc one is highly liquid and the other is illiquid.
Also matters case by case as for instance. I have seen quite a few cars with worse percentage returns than the the numbers above.
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Agreed on the first part. Not sure about the second.
Other than BMW, no captive’s MSD ROI is less than Volvo’s.
Mercedes, Toyota/Lexus and Nissan/Infiniti are all better.
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Most other investments that offer a comparable risk profile aren’t much more liquid.
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Fair enough but in general the value of liquidity is underrated IMO.
And I was thinking of BMWs for poor ROI on Msd so that is also funny max.
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They used to be so much better. There was a change in mid late 21?? I think. Is fuzzy
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Just be careful with it and remember that if you have any damage when it goes back they will deduct it from the check that they will mail you back after turning it in. So when you are returning it make sure to get an inspection first and video of the entire car so they cant pull anything on you
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there are other, more significant, drawbacks for a one-pay. if the car is totaled, getting the onepay money is not easy. i do agree that msds are worthless with certain brands now, especially bmw. they are very much worth it on some.
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Not with BMW.
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