Security Deposit
Also known as: Lease Security Deposit, MSD, Multiple Security Deposits
A lease security deposit is a refundable payment made at signing that can lower the money factor on a lease. The multiple security deposits (MSD) strategy involves making several deposits to significantly reduce the interest rate.
How Security Deposit Works
Some manufacturers allow you to make one or more refundable security deposits at lease signing, with each deposit lowering the money factor by 0.00007 (approximately 0.17% APR). Deposits are typically rounded up to the nearest $50 from your monthly payment. For example, if your payment is $423, each deposit is $450. You can usually make up to 7-10 deposits. All deposits are refunded at lease end. This is essentially a guaranteed return on your money — you earn the money factor reduction, which can be a better return than a savings account. MSDs are most beneficial on leases with higher money factors.
Example
Monthly payment: $500. Each MSD = $500 (rounded to nearest $50). 7 MSDs = $3,500 upfront. Each MSD reduces MF by 0.00007. Total MF reduction: 0.00049. On a $45,000 car with 58% residual, this saves ~$35/month. Over 36 months = $1,260 savings on $3,500 deposited (36% return). All $3,500 is refunded at lease end.
Frequently Asked Questions
What are multiple security deposits (MSDs) on a lease?
Multiple security deposits are refundable payments made at lease signing that lower the money factor. Each deposit reduces the MF by approximately 0.00007. You can typically make 7-10 deposits. All money is refunded at lease end, making this a risk-free way to reduce your lease cost.
Which manufacturers allow multiple security deposits?
BMW, Mercedes-Benz, Lexus, Infiniti, and Acura are well-known for allowing MSDs. Toyota and Honda do not typically offer MSD programs. The availability and terms vary by manufacturer and can change, so check with the leasing company before assuming MSDs are available.
Is the MSD strategy worth it?
Yes, if you have the cash available. The effective return on MSDs is typically 5-10% annualized — better than most savings accounts — and the deposits are fully refundable. The only risk is if the car is totaled and there is a delay in getting your deposits back.
Related Lease Terms
A money factor is the interest rate on a car lease expressed as a small decimal.
Due at SigningDue at signing (DAS) is the total upfront payment required when signing a car lease.
Capitalized CostThe capitalized cost is the total amount being financed in a lease — the lease equivalent of a purchase price.
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