Downside of MSDs?

That’s definitely not true in my case. I was leasing a BMW and the car was totaled (I was not at fault, but that shouldn’t make a difference). After the insurance company paid the remaining balance I owed, BMW Financial refunded my MSDs within a few weeks. Additionally, I ended up with ~$2k leftover from the insurance payoff in addition to the MSDs.

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If you transfer your lease, the MSDs will go to the new lessee. I have seen people ask for MSDs from the new lessee but that obviously narrows down your pool of people that can take over your lease.

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I terminated my lease early twice, and got ghe MSDs back without any issues

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This is really the only downside of MSD that I know of.

I’m surprised the OP found erroneous information about MSD (i.e. the myth that ‘you lose it if the car is totaled or stolen’) on bimmerfest as that is probably the most lease-friendly forum after LH and edmunds and has lots of useful information (including helpful dealers who tend to be fairly transparent to the extent possible)

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To directly address your question in the subject (but not mentioned in OP post): There are financial downsides to MSDs as well. I think people have the tendency to forget time value of money when putting down MSDs. You put down $8k to lower your interest rate by 2% when you could be getting a 5-10% return in a index bond or equity fund.

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The math for this has been worked out in this forum (maybe time for a refresh) that takes this into consideration. MSDs are guaranteed returns of approx 10-11% (specially for the higher payments) so unless you can get a guaranteed return with zero effort to match that rate, the MSDs are always better deals.

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You’re absolutely right. Looks like it becomes a better deal after ~$450/month. My bad. And also I now regret not putting more down.

Folks, sorry for the newbish question, what does acronym MSD stand for? It’s been mentioned 20+ times in this thread but no where did anyone mention what the abbreviation stands for?

And what is the concept, and how does it lower your payment if a person were to give $2k or more up front?

Multiple security deposits

It is a refundable deposit that lowers your MF (interest rate) by a small portion. They usually return a nice % since most often the lease is for a more expensive vehicle. If your MF is already low, then they do not make any difference. Only a few lease companies have the program. GM does not.

If you total your vehicle you may be out of the MSD, SOME lease programs cover it through gap, some GAP policies will cover it as well.

Your insurance company is not required to pay for what you owe or what you have into the vehicle, only the fair market value at time of incident.

According to whom?

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You do not lose MSD’s if the car is totaled. The MSD’s monies are held by the captive finance arm of the manufacturer and in exchange for cash now for them they lower the money factor for you the buyer. They are fully refundable when the lease matures. There is no risk of losing that money.

BMW FS is what I have experience with, however I know their MSD program changed recently so it may be different. Still a downside to double check.

MSDs with luxury car leases (in-house leasing arm) are mostly straight forward.

I tell you a potentially much harsher/worse scenario - “Pre-paid” lease: Recently friends pre-paid lease BMW Total (even though it appeared a minor one albeit airbag deployed).

BMWFS Gap covered approximately $9k - on top of insurance agreed payout (their determined market price)., BMWFS agreed to return remainder of prepaids)

Many of the luxury car makers (in-house leasing arms have/provide built-in GAP insurance, at no cost to buyer, consider mostly safe - may be a bit of hassle to go thru). But 10-11% savings provided by MSDs may be worth the hassle-factor (you gotta be financially savvy, and carry decent insurance carrier!)

I am thinking a potential bad scenario - you and a drunk friend returning home after a party/bar - she/he is driving, and Total the car! If your insurance determines not to pay, due to Total caused by an un-listed or drunk-friend diver. You may be on hook for lot more than MSDs at this point!! But why risk MSDs In such scenarios. Hence - being with good insurance carrier is very important in leases - particularly with MSDs, or ever more important in case of Prepaid leases!!

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Bmw stopped doing msd on May 1st

You have the risk of losing the MSD’s also if the captive finance company goes Bankrupt since the money held is not FDIC insured. But if Mercedes, Lexus etc… go BK we got bigger issues.

this is not true, it’s captive lender and insurance company specific. There’s no “one answer” that fits all when it comes to losing MSDs in case car gets totaled.

Well I would think that would need to be spelled out very clearly in the contract if that’s truly the case since most captive finance arms, aside from TFS from what I understand, include GAP insurance to cover a vehicle if it’s totaled.

As long as insurance + gap pays the balance owed on the vehicle, you should get your MSDs back.

There is no reason for the finance company to keep your refundable security deposits if you have fulfilled your contract by paying for the vehicle.

Revisiting a very old topic here but I figured it would be smarter to respond rather than a create a new post. I’ve never used MSD’s but plan to within the next few weeks of leasing a new vehicle.

I have a few questions that I would appreciate if someone could just provide me with the answers to.

  1. Does BMWFS or Audi financing automatically include GAP when financing through them?

  2. In the event that I either sell my lease via carvana, trade my vehicle in to a different dealership, or return my vehicle to existing dealership, I will eventually receive a check for my initial MSD balance?

  3. I don’t plan on ever doing a lease transfer which it appears that may be the only way MSD’s are not returned.

Is there anything here that I’m missing? I’ve read countless threads regarding when MSD’s make sense financially so I’m not worried about that subject. Thanks in advance.