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Old 03-08-2010, 01:44 PM
JM71 JM71 is offline
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Join Date: Aug 2006
Location: Birmingham, AL
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Does each security deposit reduce the money factor by the same amount? When I recently leased a 335 for my wife, the first security deposit was the greatest reduction. Subsequent security deposits reduced it by less. When I ran the numbers, more than 1 was not worth it.

I know someone will ask, so here is the answer. It is easy to determine if security deposits are worth it. Simply divide the amount by which your payment goes down and by the amount you had to give them (lend them). That is your simple interest rate of return. You can get fancy and calculate a compounded rate of return if you like. Bottom line is that if you don't need the security deposit money and the rate of return is better than you could get in the market, then make the security deposit. In the case of my wife's car the first security deposit had a ROR of around 21%. Subsequent security deposits had a ROR of around 2%. I kept my money and only made one deposit.
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