Topic: Multiple Security Deposit Leases

[Ertyu]

Who offers multiple security deposit leases and what are the terms?

A multiple security deposit lease is where you provide multiple security deposits which are returned at the end of the term in exchange for a reduction in interest rate.

[Froggy]

Wouldn't it be smarter to invest the money at a higher return prospect than locking it for 4 years to get 0.5 or 1% down? I guess the leasing company is the real winner there as they get to invest money....
Just my $0.02...}

[Ertyu]

It depends highly on the terms, but here's an example:

$25000 purchase price
48 months
5%
50% residual
$339 payment

I've seen 0.25% reduction for each additional security deposit up to a maximum of 10 before, so thats a 2.5% discount at maximum and a 2.5% interest rate for a $299 payment.

To get the same payment with a 5% interest rate, a down payment of $1700 is required.

The security deposit would be 10 x $299 = $2990
and the return is $1700 npv. ~57% return. Lets see you make that on the open market.

You can use GM's calculator to play with the numbers: http://www.gmcanada.com/english/financing/gmac_calc_pop.html

[Ertyu]

Thats a 57% return over the 4 year term, not per year.

[Froggy]

Ok in that case, I guess you are right, but how do you get those terms?  
I was expecting something more in the line of "Put $5000 as a security deposit and get 1% down".
Why would the leasing company agree to such term unless they are sure to top 57% over 4 years, which I agree with you is really difficult.
I assume the initial scenario implies a $0 down, doesn't it?

[S60]

As far as I can remember many companies offer
this type of lease plan.
EG:Volvo, BMW, Audi/VW, Lexus etc

[Ertyu]

Its the basic premise of loaning money. Reduced risk = reduced rate. By providing security against the loan, they are willing to give you a better rate.

[Froggy]

Ok, I get it. Basically, if you tell the seller:
"I give you 3000$ in deposit", he will reduce the interest rate. Plus, I guess it is another incentive for you not to surrender your lease to somebody else as they would have to refung your deposit.
Are most of the dealer willing to do that?
But why the "Multiple"? Why not 1 big Security deposit?
I ask all those questions because I may be interested in leasing a vehicle and I want to know what I can do to lower the payments and the money lost on interests alone....
Thanks for the insight on this Ertyiu!

[Ertyu]

It is just one big security deposit. Its just multiple of the regular security deposit.

I'm trying to figure out which companies offer this, ie the purpose of this thread.

[ovr50]

Toyota Canada does it as well. You can increase the security deposit up to a set max for a proportionate reduction in the lease rate.

[Froggy]

How come you cannot find this information on the manufacturers' websites?

[S60]

From GM of Canada website-
We offer competitive retail interest rates and flexible financing terms which means you need go no further than GMAC to get your best deal. Your GM Dealer/Retailer is there to help you decide what's best for you.
You deal with GMAC auto finance specialists, and that means you get the best terms and service available. Auto financing is our specialty; we ensure you receive the excellent service you deserve.
Our Customer Service Centre offers superior service and support at extended hours, 6 days a week. As one of the country's leading automotive financial services providers, we have what you need. Call us at 1-800-616-4622
http://www.gmcanada.com/english/financing/fina/fina_advant.html


(Message edited by S60 on December 08, 2004)

[Froggy]

Do you get interest paid on the deposit?

[Sterling]

No leasing company pays interest on security deposits. Ford,GM, Chrysler do not offer this, to my knowledge, as they already have subvented lease interest rates on almost every product already.

[ovr50]

Froggy - No. I have never heard of anyone doing that.