For my last few leases I put down max MSDs to lower the MF. The conventional wisdom then was that msds were a no-brainer. However, I see more and more people advising against it. Maybe that has to do with the post-covid bull run. For those who have leased recently or plan to in the near future, are msds actually still a thing? For reference, I would have to put in $8,000 to lower APR from about 2.4% to 1.2%. Doesn’t really seem to make sense does it?
ask @eastcoastcarguy
2 Likes
How much would the $8K save you over the duration of the lease?
1 Like
Can you do better than 1.2% over that period on $8k invested somewhere?
Of course you can.
Imo im against it, SPEAKING FOR MYSELF i rather invest my money into something else than giving someone my money to hold on. If I cant afford the car note without MSD then i move on. Another reason why i dont like it FOR MYSELF is i like to swap out of leases most of time and its not easy finding ppl to give you money for it. Not everyone knows whats MSD
1 Like
As a broker, I am against it because I wouldn’t offer something to someone that I wouldn’t do. If you look at from a standpoint from ROI, it can make sense but in reality, it depends on personal preference. I did it once for a client and it turned into a cluster. For those reasons im out 
This is YOUR answer.
However, instead of focusing on APR or MF, you should evaluate delta on monthly payment and decide if monthly saving yielding better rate on MSD funds than what you may get risk-free investment.
The CFP police might come after me for overlooking the present value (PV) and future value (FV) of MSD, and for my bold claim of a “risk-free” investment. It all boils down to opportunity cost. During the ZIRP era, it was an easy decision. However, with CDs now offering 4-5%, I decided to skip it on my last lease. The F&I manager often struggles to draft the paperwork correctly, leading to delays and funding rejections due to mistakes
2 Likes
This is a badass answer 
I guess my question is, why were MSDs highly recommended a few years ago? Did they have a greater impact on money factor then than they do now? Even one-pay leases don’t seem to make sense in a lot of scenarios I looked at. What has changed about the leasing environment that is responsible for this shift?
In my particular situation, it would save around $400 over the life of the lease. That’s about one year if I put the same money into a HYSA. Obviously I won’t be getting 5% returns on that forever, but msds feel so silly now. I’m just shocked that the repeating trope on LH just a few years ago was “IT’S A RISK-FREE NO-BRAINER RETURN ON YOUR INVESTMENT!”
1 Like
They’re also tax free. You have to do the math but in a lot of cases MSDs beat the after tax return of alternatives. And the math is not “it lowered the effective interest rate by 1%, I can do better than 1%”. The MF is applied to adj. cap. cost + residual. You calculate return on the MSD amount which is a much smaller number than adj. cap cost + residual.
2 Likes
Which brand is this? Every brand has a different ROI.
1 Like
Audi. I guess base MF for this month, for this model is low enough that a msd reduction doesn’t make sense.
On Infinitis it absolutely makes sense
i just did a 25 qx60. $100/month msd savings on 5850 of msd. $3600/5850 of savings over 3 years…
3 Likes
did em on my etron gt. $60/month on a 12 month lease that will be extended. easy.
Audi has one the lowest ROI… something like 10 MSD only gets a .00045 reduction
Even then your math must be a little off to save only $400 from $8,000?
BMW has the lowest at 42 points.
1 Like
That’s for 7, correct?
1 Like
I just quoted someone an iX M60 and doing MSD’s would return him 32.7% on his MSD outlay over the 3 years, tax free, or 10.9% annually. For that kind of ROI, if you’re the kind of person who takes care of your car, there is almost no reason not to do it unless you don’t have the cash on hand.
2 Likes