Yeah, that’s what I’m wondering, too.
OP, when you put the numbers in the calculator, you really only save $400 over the life of the lease?
Simple math
Monthly savings * 12 / total MSDs = % APY
How does x% sound for a no-risk investment?
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Sorry, that was $400/yr over the lease term
In descending order, some of the best MSD programs off the top of my head
Infiniti: .00010 reduction per SD
Nissan: one-pay plus MSD
Toyota/Lexus: .00008
Mazda: same as Toyota?
As always these are contingent on the dealership’s FM/GM knowing about MSD and thus willing to apply them.
Reasons not to:
BMW: if transferring is your plan
Mercedes: if their contracts still include language that defines a total loss as a default event and that effectively forfeits your MSD
$400/yr for $8000 seems decent to me… (at least, not “dumb”).
A few days ago, a poster presented me with a lease that includes 10 MSD’s. Long story short, here are a few details…
MF w/o MSD’s = .00192
MF with 10 MSD’s is calculated as follows…
.00192 - 10 x .00004 = .00152.
MSD Base Pay = .00152 x (79284.63 + 71424.00) + (79284.63 - 71424.00)/24
= 556.60
MSD Contract Pay = 556.60 x 1.07
= 595.56
The contractual pay w/o MSD’s = 660.07
Monthly savings with 10 MSD’s = 64.51
There are many tools to compute the after-tax ROR including the EXCEL RATE function and a TI-83/84/89 calculator.
Using the TI-84, I get an after-tax ROR = 13.04% using the following inputs…
N = 24 … Term
I% = 13.04 … ROR - calculated
PV = -6000 … upfront out-of-pocket investment
PMT = 64.51 … monthly savings
FV = 6000 … Investment returned after 24 months
P/Y = 12 … number of monthly payment savings per year
C/Y = 12 … compounding periods per year
PMT: BEGIN … lease payments made at beginning of month
Your decision. If 6k is a hardship, I wouldn’t do it. Otherwise, can you earn an after-tax ROR exceeding 13.04% that is almost risk-free? You may answer that with a BIG NO and choose not to do it anyway… and that’s okay. It’s strictly a personal decision.
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Mercedes is the worst now. 10 at .00040. On a $100k car, the return can be like 2% a year.
I always marvel at your posts and the math involved. The algebra itself is straight forward, just where you know to place the variables. Amazing.
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Many thanks for your kind words.
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Yup. The real answer, as it always has been, is it depends on your own circumstances and you should calculate the ROI for yourself.
My marginal federal rate tax is 37% so MSDs made sense, at least compared to 5% return treasuries for the SPECIFIC car I brought for my family member. If you’re scraping by financially, MSDs probably aren’t a good idea as you’d want to hold on to the cash in case something comes up.
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If you don’t have the cash on hand maybe review your purchase decision…
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Maybe a luxury car isn’t a great choice regardless of MSD.
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Not only luxury cars have MSDs, you know. 
A post was merged into an existing topic: Off-Topic Landfill 6
WTF 
Even your short story is long … 
I love your replies prof. You gave my first deal thread your very signature reply and encouraged me to learn this hobby.
Thank you for your service to the community. 
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So glad I was able to help and a huge thank you for your kind words.
What happens if you’re upside down and total the car? Wasn’t there an MB lease story last year where they used the MSDs to cover the negative equity? I’m sure this varies from bank to bank, but want to point out MSDs may not be as risk free as people think.