[LSM]

Originally Posted by M6-Coupe

It's about leasing a car.
Your monthly payment is calculated based on the Sales price, MSRP, Residual, Money Factor and some fees such as document fee, Title and License and etc.
Let's have an example:
You are going to lease a car. MSRP 100,000 and Sales price 90,000 after negotiation. The residual 54% and money factor 0.0012.
Based on residual value of 54% this car will be $54000 at the end of lease.
You got the car for $90k so you owe $36K that you have to pay in 36 months lease term or $1000 per month.
In top of this payment you have to pay rent fee because you are leasing this car. The rent fee is calculated based on money factor (MF) and residual Valle (RV) and sales price (SP). Rent Fee = MF* (RV + SP).
in this case the rent fee is 0.0012 *( 54000+90000) = 172.8
so your total monthly payment is 1172.8 excluding tax and other fees.
assume the total tax and other fees $220 ( it's just a number I pick to show you calculations); so your monthly payment is $1392.8
In fact the money factor indicates the interest rate that can be calculated
as: Interest rate = MF * 2400/100. in this case the interest rate is %2.88
Now BMW give you the option of Multiple Security deposit (MSD) up to 7 MSDs and each MSD reduces the MF as 0.00007.
One Security Deposit (SD) is defined as the monthly payment rounded up to the next $50 (so if a leasing plan requires monthly payment of $1392.8 per month including taxes, the SD value is $1400).
Now if you put 7 MSDs ($9800), then your money factor reduces to 0.00071
and your rent fee reduces to $102.2 per month. It means you can save around $70 per month.

Well written!