# Multiple Security Deposits - Dumb or no-brainer?

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 …