# Security Deposit **URL:** \ **Category:** Ask the Hackrs\ **Created:** [December 17, 2015, 3:22pm UTC](https://forum.leasehackr.com/t/security-deposit/110 "2015-12-17T15:22:18Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![Travel\_Email](https://leasehackr.b-cdn.net/letter_avatar/travel_email/32/5_5575768a8748004e209b776fc1b2916d.png) [@Travel\_Email](https://forum.leasehackr.com/u/Travel_Email)\ **Post date:** [December 17, 2015, 3:22pm UTC](https://forum.leasehackr.com/t/security-deposit/110/1 "2015-12-17T15:22:18Z")
Can you explain in detail how the 5 refundable security deposit thingy works…? I live in Wisconsin so I am not sure if some of what is on this site is the same here as it is in California… although I am only 1 1/2 hours away from Minneapolis St. Paul… Thanks! ---
**Author:** ![michael](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/michael/32/162_2.png) [@michael](https://forum.leasehackr.com/u/michael)\ **Post date:** [December 17, 2015, 10:35pm UTC](https://forum.leasehackr.com/t/security-deposit/110/2 "2015-12-17T22:35:30Z")
Hi there, Some brands, such as BMW, Mercedes, and Infiniti, have a Multiple Security Deposit program, which allows you to lower the “money factor” (i.e., the interest rate on a lease) by putting down a security deposit. This will reduce the finance charge and result in lower payments. For example, BMW’s current MF rate is .00131 (equivalent to 3.14% APR). Each security deposit lowers the MF by .00007. If one were to place 7 security deposits (the maximum allowed by BMW FS), then the MF would drop from .00131 to .00082 (1.97% APR). Using multiple security deposits (MSD) can save hundreds, if not thousands, over the term of the lease. Unlike a down payment, you get your security deposit back when you return the car. You can play around with MSDs on our Lease Calculator: [http://leasehackr.com/calculator](http://leasehackr.com/calculator) Note that not all manufacturers offer a MSD program and that MSDs are not available in NY. Michael ---
**Author:** ![woblack](https://leasehackr.b-cdn.net/letter_avatar/woblack/32/5_5575768a8748004e209b776fc1b2916d.png) [@woblack](https://forum.leasehackr.com/u/woblack)\ **Post date:** [December 20, 2015, 4:57pm UTC](https://forum.leasehackr.com/t/security-deposit/110/3 "2015-12-20T16:57:13Z")
I’m new to the idea of MSDs as well and am curious, what are the downsides of using MSDs? Is there any case where you can’t get the MSDs back (ie: if the car is totalled/stolen, etc.)? ---
**Author:** ![michael](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/michael/32/162_2.png) [@michael](https://forum.leasehackr.com/u/michael)\ **Post date:** [December 20, 2015, 5:34pm UTC](https://forum.leasehackr.com/t/security-deposit/110/4 "2015-12-20T17:34:05Z")
> [@woblack](#): > > curious Good question. Say the car is totaled and your pay-off is $16,000. But the fair market value of the car (i.e., the amount your insurance company will pay) is $14,000. Nearly all leases from a manufacturer come with GAP insurance, which will cover the difference of $2,000. This way, you can walk away from the car without incurring any penalty. Once the manufacturer gets its pay-off amount back (i.e., residual + remaining payments due), they will return your security deposit. We prefer a MSD to a down payment (aka, capitalized cost reduction). Say you put a down payment of $2,000 to lower the amount financed. The car is totaled. Assuming the same car, the pay-off amount is now $14,000 (because you paid $2,000 upfront already), and your insurance company pays you $14,000. You can walk away from the lease – but you’ve lost your down payment amount. GAP insurance never kicked in. The only MSD downside I can think of is the lost opportunity cost of capital… but then again, what investments can get you an ROI of 40%+? ---
**Author:** ![IRG](https://leasehackr.b-cdn.net/letter_avatar/irg/32/5_5575768a8748004e209b776fc1b2916d.png) [@IRG](https://forum.leasehackr.com/u/IRG)\ **Post date:** [April 7, 2016, 1:59pm UTC](https://forum.leasehackr.com/t/security-deposit/110/5 "2016-04-07T13:59:12Z")
Explain how this would be a ROI of 40%? I still don’t get how giving up a significant sum of money to reduce the money factor a little bit, make any financial sense. Probably why it is not allowed in NYS, because it’s a bad deal for the consumer (we might be a highly litigious state to live in, but there’s a reason, lol). I get that with each deposit (what is a typical deposit amount anyway, $1k?) it reduces the money factor by .00007 - which if multiplied by 2400 = .16%. If the money factor is low to begin with, then I see even less how this makes sense. But it must be a combination of starting out with a fairly high moneyfactor, and a vehicle with a high cap cost, where every little equation could save you considerably. On a higher end Mercedes or BMW, I might see how this makes sense. On a Honda Civic, I don’t get it. Guess it’s all moot for me anyway being in NYS, but I want to understand, lol. ---
**Author:** ![ffflllyyyeeerrr](https://leasehackr.b-cdn.net/letter_avatar/ffflllyyyeeerrr/32/5_5575768a8748004e209b776fc1b2916d.png) [@ffflllyyyeeerrr](https://forum.leasehackr.com/u/ffflllyyyeeerrr)\ **Post date:** [April 7, 2016, 8:57pm UTC](https://forum.leasehackr.com/t/security-deposit/110/6 "2016-04-07T20:57:13Z")
The idea here is that your lease is a sunk cost, in that you’re buying it with or without a MSD factor. Here’s how it works out as an “investment” in that scenario. Really I use “investment” in quote for a reason, as it’s not really an investment. It’s just a reduction in costs of your lease, but if you were to assume you were leasing regardless, it’s a great return. BMW lease, assume $50k car for 36mo and 60% residual for easier math. Original MF of .00131 Max MSD MF of .00082 Original MF lease finance charge = $3,772.80 = (50000+50000x0.6)x0.00131x36 Max MSD MF lease finance charge = $2,361.60 = (50000+50000x0.6)x0.00082x36 Monthly payment for this lease would be $621.16, so a $4,550 deposit for max MSD. This results as if you were to include a MSD, you can reduce your payment (total lease cost) by $1,411.2 and thus a “return” of 31% in the 36 months on your “investment” of a MSD. ---
**Author:** ![Yuri\_Nader](https://leasehackr.b-cdn.net/letter_avatar/yuri_nader/32/5_5575768a8748004e209b776fc1b2916d.png) [@Yuri\_Nader](https://forum.leasehackr.com/u/Yuri_Nader)\ **Post date:** [January 21, 2019, 5:33pm UTC](https://forum.leasehackr.com/t/security-deposit/110/7 "2019-01-21T17:33:07Z")
I’m still confused. How much is each MSD? Is it 1000 per MSD? ---
**Author:** ![gc2a](https://leasehackr.b-cdn.net/user_avatar/forum.leasehackr.com/gc2a/32/11057_2.png) [@gc2a](https://forum.leasehackr.com/u/gc2a)\ **Post date:** [January 21, 2019, 5:53pm UTC](https://forum.leasehackr.com/t/security-deposit/110/8 "2019-01-21T17:53:23Z")
You may be able to find more details in this thread: > [@Where can I find the terms/conditions and further details on MSDs in writing?](https://forum.leasehackr.com/t/where-can-i-find-the-terms-conditions-and-further-details-on-msds-in-writing/91092): > > I’m recommending to someone to use MSDs for an Audi. He (understandably) would like to see the details in writing, but when I called Audi Financial Services they had no clue and told me to call Audi of America… who also had no idea what I was referring to. Is there anywhere in writing where I can find terms/conditions for MSDs for Audi (and other manufacturers, for that matter)? I read thru the forums but only found discussions that recommended the use of MSDs, not actual links to any direct s…