Copier Lease Term Selection – Match your expectations
Choosing the correct copier lease term will affect your overall experience and satisfaction with your chosen equipment. If you change your equipment out every 3 years, don’t sign up for a 48, 60 or 63 month lease. Although the longer term carries a lower payment, it will cost you more over the term of the lease term. Besides, it will be that much longer that you must keep the aging equipment. If you have been replacing equipment every 3 years, you should consider that a 5 year lease is going to have you in older equipment than you are used to. A 5 year lease is fine for some businesses and certain people. However, you should be aware that it is the leasing company that gains the advantage by holding you to a 60 month commitment. Should you trade up with 2 years remaining, much of the payment on your next lease will be due to refinancing what is remaining on the current lease. This benefits the leasing company and the dealer by increasing cash flow to their pockets, not yours. On the contrary, there is nothing quite so bitter as paying for the same thing twice, as you would be in the case of such an early trade up. The option of terminating or trading up a leased copier printer before the end of term has pitfalls you may not be aware of: First, changing vendors pre-term will cost you money and aggravation. The leasing companies give preference to the copier company that initiated the original “deal”. Plus, they will tack on fees, such as remarketing or early termination fees if the lease is bought out by a different dealer. Staying with a dealer that you are less than thrilled with, may turn out as the favorite option at that point, to avoid fees. Consider talking to your own trusted accountant or contract lawyer about entering into a lease. Some may like the idea, as they too may lease equipment. I know accountants and lawyers from both camps. Not even the most conservative of accountants pays cash every time. Leasing has a valuable place for business. The key is proper copier lease term selection that meets your objectives.
Copier lease term – Consider one with a $1.00 buyout
The difference between a $1.00 buyout and a Fair Market Value (FMV) buyout is simply that one lease ($1) has you, the lessee, owning the equipment at the end of the lease for a dollar. In contract, the FMV lease requires the lessee to purchase, return or continue renting the equipment at term’s end. That’s right, the option of doing nothing does not exist. That means the customer (lessee) will at least be required to prepare, insure, arrange and pay for return shipping of the equipment to the lessor (leasing company) shown on the lease document. Note, the lessor is rarely the copier vendor, even when the lease seems to indicate otherwise. In search of a lower payment, the term and disposition often are taken out of consideration, which can be a costly mistake. The difference in payment between a 60 month lease and a 48 month lease may be 20 – 30 dollars a month on a $150 lease and the $1.00 buyout option will add another $12-17 per month. However, if the customer becomes in need to replace, upgrade or switch out the equipment at 48 months, the savings will be perhaps double the combined cost of the larger payments. In addition, the flexibility to use other vendors will be significantly increased, once the lease has ended (termed out) and you own the equipment. Why a business would lease an asset that has no likely possibility to last the full term of a non-cancellable lease is a mystery. Sales people may be to blame, in part, for this. The lack of understanding of a lease or failure to even read the fine print of a lease being signed also plays a role. For the latter, only the lessee can make a difference. Lease term selection can best be accomplished by learning about leasing. I do my best to educate customers on the various term options, dispositions and requirements of the lease.
Maintenance and how it relates to the copier lease term
Consider the cost of maintenance down the road, into the lease. Perhaps, there is a built it annual escalation of the maintenance portion of the deal. 10% is common as an increase each year, but know you are protected for the term of your lease. Will your copier dealer guarantee maintenance and satisfactory operation for the full term of the lease? The answer would appear to be “of course”, but don’t assume that is the case. Much money is made in the copier leasing game by dealers churning their customer’s leases. This results in interest on interest financing and ultimately a substantial balloon for the customer, if they ever want to be done with leasing. That isn’t to say leasing is bad. Its simply to point out that a customer needs to understand that the term of the lease is exactly how long the customer should intend on having the piece of equipment along with the good, the bad and the ugly that accompany having the equipment. Maintenance should be viewed as a necessity, but can not responsibly be assumed. The key, I think, is to project yourself and your business into the future and see what the copier, lease, maintenance plan, related costs and integration in your business will look like. That is, how the deal you make today will affect you and your business in years to come. Don’t let near sightedness stifle your future happiness with the deal you make right now. Instead, plan ahead and make a deal with the term and maintenance plan that will best satisfy you all the way around.
Summing up copier lease term selection
Don’t count on a sales rep to help you choose the right copier lease term. But do get alternate term quotes for comparison. Consider a three year lease with a $1.00 buyout. The payment will be more, but it is likely a more realistic time frame to commit to being in a lease. Plus, you will own the equipment with a realistic outcome of being able to enjoy it without a payment for some time to come after the term is up. Recognize that a lease is also a way for a dealer to control you in as much as your leased equipment and maintenance is concerned. Leasing can be a great tool for a business to have useful equipment with services bundled together. On the other hand, only if you choose the right copier lease term for your business, will you have a satisfying relationship with your copier company and maintenance people for the entire term.
Seldom do 63 month leases have a happy ending for the customer. Sadly, a 63 month copier lease usually winds up costing the customer a lot more money and a lot of frustration before the term is finished. Many customers could be better served by opting for lightly used, demo or discontinued equipment on a shorter term for the same of less payment. The problem is often that options are not known until afterwards.
About the Author – Eric Klee
I have nearly 30 years experience in the copier business, leasing, selling and servicing equipment as a sales rep, copier dealer owner, manager and customer advocate. If you care to discuss this topic further, I will be glad to talk to you about this or any other issue concerning finance, printers, copiers, scanners or service. Give me a call at 813-901-5666 for immediate assistance or to schedule an appointment.