Something to consider on your next lease.
If you're in the market for a brand new car and leasing is on the table, hear this out. Apparently, there's a way to lower your overall monthly payment by thousands of dollars. How? Through multiple security deposits, something that is offered by some manufacturers.
This was brought to light by a financial advisor named Humphrey Yang on Tiktok. The advice was actually from Cartelligent, which explains multiple security deposits in detail. One of the examples mentioned here is when leasing a BMW 3 Series.
Multiple security deposits lower the money factor or interest rate by a fixed amount. Usually, it is the same as the monthly payment amount rounded to the nearest $50. For this example, the BMW 328i, which has an MSRP of $43,845, the security deposit costs $500. Paying three security deposits ($1,500) at the start of the lease can reduce the monthly payment to $485 from $500, which saves you $525 through a three-year lease.
Paying more security deposits can save you more since it lowers down the money factor further. With the example above, paying seven ($3,500) reduces the monthly payment to $465. This saves you $1,225 – a 10.5 percent return to your $3,500 investment.
Of note, security deposits differ from drive-off fees or downpayment. Security deposits are refundable, which you will get at the end of your leasing period. The amount you save increases as the SRP goes higher as well.
save over $3,400 on average off MSRP* on a new BMW 3 Series
Car leasing is a popular choice of obtaining a vehicle in the U.S., primarily because you don't need a huge amount to pay upfront, as opposed to paying in cold hard cash. Leasing also doesn't require you to pay a lot monthly, in contrast to financing your car.
But it does have its drawbacks – you practically don't own the car; you're just renting it through the time period.