BMW MSD question/design

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I’m exploring MSD for my lease of a 20’ bmw X7 M50, and for most part I see a lot of upside. ROI (vs sitting in the bank), lowering monthly payments, getting it fully refunded at the end of the lease term. (Seems to me like a no brainer)

But what are the dealerships betting on? Are they actually borrowing from us at a higher rate than they can get in todays low interest market? Doesn’t make sense.
Or the calculations are if a few customers do in fact lose their MSD due to total loss or theft the dealers are making up for it in that respect.

Excuse my lack of knowledge - I’m new to the game.


BMW FS are no dummies. They have figured out what their risk reduction is in holding what are effectively advance payments on a lease. In exchange for the lower risk, they offer a lower interest-rate.

Also, the rules for this are not set at the dealer level. The amount of money factor, a.k.a. interest-rate, buy down is fixed by BMW FS.

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Dealerships are not betting on anything. Dealerships do not hold your lease contract. BMW Financial Services does.

The lessor uses our money as a short-term loan. And our interest reward is a reduction in MF. You’re overthinking this for no good reason.

If the vehicle is declared a total loss, you get your MSDs back. They aren’t a down payment. Search the forum for more information. MSDs have been discussed ad nauseam


Ok, but I calculated my annual return is 7% - why would bmw fs borrow money at that rate?

Because in theory BMW FS isn’t paying interest on the money you “loan” them. They’re providing a discount off the rate. MSDs also reduce the amount of risk on a lease for them because they have additional collateral. IMHO you’re overthinking this way too much. Focus on improving the meh offers you have on the X7 instead of the nitty gritty behind MSDs


Thanks! I was just curious on how MSD works.
Thank you for the clarification!

Are you thinking there’s some sort of catch with MSD?
Nothing to worry about, it’s as clear as it gets. You’re upfronting cash to the bank thus lowering their risk in default. In return you get a better rate. Not complicated.


I honesty wasn’t trying to imply it’s some
sort of scam or that there’s a catch I was just trying to understand the flip side of the equation. In my initial post I mentioned it’s a no brainer for the Leaser.

That seems to be on the low-end of return for MSDs. Is that using the maximum number of MSD is allowed? BMW is 7 and you should get 0.00005 reduction per deposit (0.00035 if you do 7).

Where did I go wrong?

Your downpayment. It shows negative in front of it.

I thought it’s because the taxes will be included in the monthly payment?

What number should go there? I’m only
Putting up 1st payment plus fees

To have taxes included in monthly payment select that option at the bottom.

Not true. $0 DAS means sign and drive. First payment is rolled into the lease with that (thus making the total number of payments one less than the lease term)

Thanks for the correction.

So the calculation is correct with taxes being represented up front as -4004 ?

What are you trying to calculate? It’s difficult to know why it doesn’t work out if we don’t know what the inputs are.

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Got it! Thanks

So it’s about 8.7 annual ROI

What do you think of the deal?