Downside of MSDs?


Hey guys,

I understand the beauty of putting down a chunk of money as MSD’s to lower your monthly payment (which I have done a couple of times).

The only issue I have is that if your leased vehicle gets totaled or stolen, your MSD’s are gone. I know a hefty saving you can accumulate over the years but you run a risk of losing it all if either happens to your vehicle.

Has that changed at all? Because I don’t see anyone mention that here on the forum. Just double-checking. Thx!

BMW Leasing Wiki

You have a misunderstanding between down payment (cap cost reduction) and MSDs.


At the end of the day I think the decision on using MSDs should be made on the following:

  1. your driving history - if you have a history of totaling cars don’t do it

  2. Does the reward outweigh the risk? If your interest rate on the lease is already near zero, puting MSDs down to save $15/mo doesn’t make much sense.

Is the money just sitting there at ~1% in the bank and is not part of your emergency fund? If the answer is yes, it’s usually worth it because you could potentially get a 50+% return on the money vs 1% (for example, you put $3000 in MSDs and it saves you $50/mo for 36 mo = $1800 which is over 50% of the $3000 you put for MSDs).

are you planning to swap out of the car before lease end? It is hard to find someone to take over your lease when you want your MSDs back.

Hope this helps

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no, I don’t. if a lease get terminated before the due date, your MSD’s are not refunded (unless something has changed recently)


exactly. so my point is that people should be educated that their MSD’s may not be refunded if their lease gets terminated involuntarily.


i don’t think that’s entirely true, i think that depends on the car manufacturer and/or your insurance company. It needs to be looked at on a case-by-case basis.

I want to add that it’s very difficult to get a straight answer out of either.


right. that was my point that I didn’t see anyone mentioning such possibility on this forum. At least from the info from the few BMW forums, the consensus was that BMW wouldn’t refund MSD’s if a lease gets terminated prior to the due date (but they have no problem giving back the MSD’s to the new transferred owner at the end of a lease).


It would take a massive accident to total a brand new to 3 year old vehicle. Wouldn’t insurance consider the MSD as part of making you whole again?


@adamcar my understanding is that some insurance companies would pay out what the car would be worth at the time of the accident which is often times less than what you owe


I’ve always been wondering about this too. Everybody says MSDs are refundable, but they are “security” deposits in the end. So - what kind of security then?


@Ursus they are refundable at end of lease if you make it that far


Yeah, but if you total? We talk a lot against CCR for the exact same reason - if you total blah-blah-blah


So you are saying that if someone were to buyout their lease early, they would lose your MSDs? That’s not correct.

My understanding is that MSDs are refunded after the contract is fulfilled. It can be fullfilled in any of the following:

  1. Vehicle is returned at the end of lease agreement
  2. Vehicle’s buy-out amount is paid
  3. Vehicle is totaled and insurance pays the bank (If value is < buyout, GAP pays the difference. If value is > buyout, leasee gets the remainder)

If you want to transfer your lease early before fulfilling the lease agreement, the same exact terms are kept (except possibly tax). So the new leasee will have the same payments, thus the MSDs still have to be present. In this case, the new leasee should pay the old leasee the MSDs since the new leasee will get his refunded when he fulfills the contract.


Thats an interesting topic. I think Jon is correct in his assessment though.


I really wish to know if Jon is correct as well.

But from my previous encounters with members from BMW fora, etc., most of them say MSD’s won’t get refunded if car is totaled or stolen. And no one knew if their insurance coverage will kick in as it is a vastly different area than what a gap insurance normally covers.


That’s actually quite concerning losing all your MSD…

We praise it a lot but that’s not a small chunk of change to lose in case the worst happens.

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The MSD is still there whether you total the car or not. The finance company holds it. If you turn in the car at leas end they give it to you

If you total it the insurance will pay the remainder via GAP and the MSDs will be returned to you as you completed the lease still via the insurance pay out.

Cap cost reduction or down money at lease inception is NOT returned to you unless you’re fortunate enough to not be underwater when the insurance company pays out.


I totaled my Infiniti last year and I got my MSDs back (It took forever buts that’s​ a different story). Infiniti just accepted the actual cash value.


I guess MSD is there just in case you do not fulfill your obligations like excessive wear and tear, monthly payment, gap, etc. When insurance pays and gap pays you have paid all your obligations and MSD is returned.


For Infiniti. GAP is included in the bank fee that is charged to initiate the lease from Infiniti Financial.