Brian M.

My dealer threw a new twist into my lease negotiations yesterday. I was planning on throwing money down ($1500) on my lease to keep payments low, but he also said that I may be able to use "multiple security deposits" to lower my payment and then I get the money back at the end of the lease.

Does anyone have experience with these? How do they work to lower payments? Is there a downside?

Jah-Wren Ryel

They reduce the amount of money that is being loaned to you (a lease is effectively a loan for the entire cost of the car, but you only pay off the difference between the purchase price and depreciated value at the end of the lease term).

By putting down a security deposit, you are sacrificing the interest that deposit would have earned in the bank or wherever. The lease underwriter gives you a credit for that interest and deducts it from your lease payments.

Brian M.

How will this differ from a down payment then? How can they afford to refund the entire multiple security deposit amounts at the end of the lease? They do not refund a down payment.

I guess I am at a loss as to what they are doing to:

a) reduce my overall monthly payment which
b) reduces my overall lease cost
c) are able to refund the money back to me.

While it may seem like I am giving them an interest free loan, I am also saving money on the monthly payment as well.