[SyChO]

I have a question, but I am not sure if it only applies to Canadian dealerships or not. I plan on leasing the MZ3 and because I can give a DP the salesperson told me that the MSD plan would be perfect (don't know what it stands for). Essentially what is it, for those who don't know, its simply you give them the DP and they give it back after your lease period. It then lower's your monthly payments and they get $$$ to invest and make interest on during that period. That's what I get from it, but is this too good to be true or not?

Ex: Give $4000 DP, you get back $3500(maximum) after 36months

Thanks for the feedback!

 

[2k1_bug]

I'm not sure if it's the same as what i had before. They call it Tax-Deferred DP, where you don't pay the tax on the DP until you buy out the car at the end.

At the end of the lease, here's how they calculate your buyout: they add the DP to the residual, THEN calculate taxes, THEN give you back your DP.

Let's say your DP is 5000, and residual is 15000, then your buyout after 3yrs would be (15000+5000)*TaxRate-5000.

But it might be different from what you mentioned.

 

[zc1]

The way it works is that instead of putting $6000 as a downpayment, you would put down $3000 as a DP and give the remainder (or any part of it) as extra security deposits (multiples of the security deposit). For every multiple of the security deposit you get your lease rate reduced by 0.25%. If your security deposit is $300 and you decide to put down 10 extra security deposits then you would be putting down 10 * $300 = $3000 in addition to the $3000 that you put down as DP. Accordingly, your total would still be $6000, but only $3000 of it would be DP. The $3000 from security deposits would be invested. If the lease rate was 6.9% and you give 10 extra downpayments then your "discount" on the lease rate would be 10 * 0.25% = 2.5% and your lease rate would then be 4.4% instead of 6.9%. So in return for giving them money to invest, you get a lower interest rate for your lease. At the end of the lease term you get back the extra security deposits ($3000 in the example, above). Your monthly payments will be slightly more than if you were to do a "regular" lease, but at the end of the term if you looked at how much money you had paid out, this setup would have saved you some money. NOTE: It WON'T lower your monthly payments, but WILL lower the total that you end up paying having paid out at the end of the lease term. It will actually INCREASE your monthly payments. You should straighten that out with your salesperson and talk about it directly with the finance person.

 

[zc1]

Example -- 48-month lease w/ ~$6000 to be put down (total)

Scenario 1 (regular lease)
-monthly: $260
-DP+Security Deposit: $6,000
-paid at 48 months: (48mo*$260)+$6,000=$18,480

Scenario 2 (MSD=multiple security deposits)
-monthly: $300
-DP+Security Deposit: $3,000
-Extra Security Deposits (MSD): 10 extra SDs => 10*$300 = $3000
-paid at 48months: (48mo*$300)+$6,000-$3,000 = $17,400

Savings with MSD: $1,080

The buyout on the vehicle at the end of the term would be the same with the MSD setup as it would be with a traditional lease. The disadvantage of MSD is that the monthly payments would be higher. The advantage is that you end up paying out less overall.

The above is just a quick, rough example. I didn't add the initial required security deposit ($300) to either scenario because it wouldn't change the overall difference between the two scenarios. It would be subtracted from the total payout value in both cases (lowering the total payout of each by the same amount) so the absolute difference in the two values would remain the same, $1,080. Of course, your mileage may vary from what I've illustrated.

 

[SyChO]

Thanks ZC1 , that was very nice of you to actually take the time to explain how it worked, I appriciate it.


It helped.

 

[zc1]

You're welcome. I was mulling over why your payments might have gone down and realized that maybe I made an incorrect assumption about your situation. With the MSD were you planning on putting $0 downpayment? Your monthly payments will definitely be less with the MSD lease with $0 DP than with a regular lease with $0 DP. Your monthly payments can't be any higher than if you put $0 down (unless the ALR goes up or the residual value falls) so by going the MSD route with $0 DP you gain since it lowers your ALR by up to 2.5%. If, on the other hand, you were going to put $4000 down total, regardless of which type of lease (just split up into DP and SD for the MSD lease vs. just DP for the traditional lease) then your monthly payments would be higher with the MSD lease. Since you used $4000 DP in your example I assumed that you were going to put a DP, regardless of the lease type. Is it possible that the numbers the salesperson gave you were assuming $0 DP either way?

 

[nufsaid]

I worked the numbers and went for the MSD. It'll save me money. I then chose no money down, and put any I had as a MSD for maximum savings on interest. At the end, use the money for extra mileage charges, pay off part of the car if you buy it out, or re-invest it against another purchase/lease.

 

[The Dude]

Hi. I am new to leasing.

So, if you did not opt for the MSD plan, what would be the benefit of putting down a large downpayment for a lease? Does it simply lower your lease rate?

If you had $5000 cash, what would be the optimal way to apply it towards a traditional or MSD lease for lowest overall cost at the end of the term?

Thanks for everyone's input!

Much appreciated.

 

[SyChO]

Hi. I am new to leasing.

So, if you did not opt for the MSD plan, what would be the benefit of putting down a large downpayment for a lease? Does it simply lower your lease rate?

If you had $5000 cash, what would be the optimal way to apply it towards a traditional or MSD lease for lowest overall cost at the end of the term?

Thanks for everyone's input!

Much appreciated.

Ok well, even though ZC1 did explain it in another way that does also make sense I plan on clarifying everything tomorrow when I go see my saleman.

But from what I understand is that, yes if you put a large DP(Downpayment) for the lease it will drop your monthly payments by alot, go check the www.mazda.ca site and try it. You can go from $400/month no DP for the Sport GT to $240/month with $4500 DP(that's the max for a 21000 car). If you check on the long run you do save some money unless you can invest it somewhere that could give you a high return... which is rare and risky.

As for the MSD, these are my numbers.

Mz3 Gs with sports package no A/C ($19,900) car. 36months
No DP: $387/month
with $4000DP MSD : $257/month and he said I get $3500 out of that $4000 BACK! So to me that sounds pretty darn good!!

Tomorrow I will get the price for the Sport GS & GT so recheck this post.

 

[dinu01]

Thanks for the great explanation zc1!!!

I didn't know this option existed SyCho0.

 

[zc1]

Thanks for the great explanation zc1!!!

No problem dinu01.

 

[SyChO]

I get it finaly!

Alright, Alright! I just got home from the dealer and I think I get how all this "MSD" thing works. Here are my numbers to use as an example.

36month lease
MZ3 Sport GS (5spd) + A/C
Cost of car before tax: $22,431

Cashdown : $2,500
Trade-in: $2,200
Student Grad. rebate: $600
+ Low Km lease

= $ 254.99/month (his price, he seemed to have change the number manualy)

Buy back : $13,509

With this (includes the MSD plan) I would get a 4.15% rate.

So the first payment I would have to do with freight and tax all included would be $6,100. But because he gives me $2,200 for the trade-in that adds up to $3900. That's the cash I have to give him when I sign(includes the first month of the lease etc)

Finaly at the end of the 36months he gives back a check of $3,300 (the MSD thing :? )

------


Now if everything remains the same but you drop the cashdown to $1500 it pushes the payments up to $284

------
** Give me more money! **

Now what I really understood is that when you do the trade-in of your car you get a tax credit which can be subtancial. In my case my $2,200 only gave me $300 which sux. But higher the value the more you get. So make sure you sell your car through the dealer, either by selling it directly to them or selling it to some random buyer. This way even if you sell it to whoever you get the tax exemption from the dealer (but the buyer has to pay full tax). This helps alot.

------

My other price quote was the Sport GT with A/C @ $290/month. Unlike the other example this one has a trade-in value of $3000 for my car and $1800 cash down.

------

I am quite sure you will get lost after reading this, but if you need some clarification just ask me.

ZC1, even though I said I understood I was still a bit confused. But now I get where you got your numbers and it totaly makes sense!

------

My expectations: $290/month for the GT - A/C - 5 Spd
+
Insurance: $85 - $100 / month

Total cost per month = $400 !


------

Please pray for me so that the insurance doesn't cost me more than that! :shock:



Montreal Represent! Power to the MZ3 8)


-Edit-

p.s my record so far for longest post! lol!

 

[coffeesmurf]

Where did you get the 85$-100$/month for the insurance from?

If you want a quick quote you can go to the www.belairdirect.com website... My guess is that you will find it is much more...

 

[dinu01]

Wow!

This could mean I can afford a 3 earlier than I though

 

[SyChO]

Wow!

This could mean I can afford a 3 earlier than I though

Heheh! I ain't paying more then $400-425 per month with insurance for the 3 or else im just not getting it. I make enough money to afford it but beyond that price its just a waste of money for me.

Where did you get the 85$-100$/month for the insurance from?

The salesman at Mazda 220. He said it would be around $950-1000 for the year. Don't forget I would be insured primary on a 93' corolla wagon, my mom primary on the Mz3 and I would be secondary. My mom is 56. That's why the insurance wouldn't be "so" high.

----

Dinu01 isn't the insurance in TO sooooo freaking high? And how much did you plan on paying for your 3 and for the insurance?

 

[friedbacon]

Sorry to bump this thread but I have a question regarding that security deposit.
Is there a written and signed guarantee that you would get the MSD back? What happens if that dealership goes out of business? I'm also planning to lease a Mz3 but I'm afraid of the excessive "wear and tear charges" when you return the car.

Thanks.

 

[SyChO]

I can't answer that question since I gave up on the idea of leasing but hopefully some others here will eventually give you the answer you are looking for.





You sure you want to lease? I wondered and wondered about leasing and I came to realize that's its a big fat waste of money! :wink:


Good luck!

 

[FormerVW]

Usually for a 48 month term, leasing a car and then buying it out at the end of the lease, you would lose about $1600, instead of buying it upfront, for the Mazda3.

Those are my numbers, and I tried it with different interest rates, and always came up to around the same results.

It makes sense for me at this point. We have 1 kid, planning on a second within 2 years. When the 4 year lease is up, we will decide whether we need more room. The Mazda 6 Sport wagon is really nice!! That's what I keep telling the wife. :wink:

Plus, I put $4000 down with the MSD plan. This brings my interest rate down, and saves me $2200 in payments over the 4 year term. This makes up for the money lost for taking a lease.