Copier Buying vs. Leasing
Should you buy or lease a copier?
Sometimes this can be a daunting task, especially if you are an office manager or executive assistant who has been assigned to this decision. Typically, it makes sense to lease a machine if you are confident that you are capable of paying your monthly payment, each month on time, for the entire duration of that lease term. It also makes sense to do this if you are trying to conserve capital for other expenditures. Leasing (and renting) also qualify differently for deductions; under most standard accounting practices leasing and renting a copier can be written off entirely each month whereas a direct purchase must be depreciated over time.
Leasing a copier (also called an MFP, Multi-function Peripheral) is an extended payment option for businesses or private parties who need to upgrade or replace their current equipment with flexible payment terms. Leasing allows you to pick a payment term (anywhere from 12-64 months in most cases) and lease type ( FMV or $1 buyout). The difference is, FMV leases are simple and are the most common leases executed within the copying and printing industry. FMV stands for Fair Market Value, which means at the end of the lease term, the customer or buyer (the Lessee) has the option to purchase the machine for sole ownership at that time for its Fair Market Value. This is an appraised value that is determined by the bank issuing the lease (the Lessor). A $1.00 out lease, or “dollar buy-out” is even easier. It is identical to a FMV lease, but the only difference is what happens at the end of the leasing term. Once your lease comes to an end, instead of the option to buy your machine for the fair market value, the bank states the value of the machine at the beginning of your lease term (instead of the end), which of course id $1.00. So, you own the machine for a dollar when your lease is over!
Leasing is a form of financing the capital component of a copier that relies on spreading the cost across a number of payments over a fixed lease term. Similar, but different to rental plans. A finance lease is what is normally offered by vendors and relies on a set “residual” to determine the rates (i.e. monthly lease charge). At the end of term, payment of the residual amount (usually expressed as a percentage of the purchase price) will transfer ownership of the unit from the finance company to you.
An operating lease is different from a finance lease in that there is no obligation for you to payout the residual and assumes ownership of the goods at the end of lease term. You may, however, be able to purchase the goods at fair market value, 10% and dollar buyout. In simple terms, an operating lease is like a rental scheme but with more flexible end-of-lease options.
When does leasing a copier not make any sense?
If you are the owner of a new business and are concerned about long term survival it may not make sense. A copier lease is almost always impossible to break, so if long term commitment is not in your future, then leasing is not a good idea. Additionally, most new businesses can have difficulty getting approval from a bank for a lease; expect to sign a personal guarantee if you have been in business under 2 years and are trying to get approval for a lease, just like any other leasing contract. Also, if your business makes fewer than 700 copies a month, it may not make sense to enter a leasing contract for a business-level or multi-function copier. You might consider buying an all-in-one copier, which is smaller, usually desktop copy machine that can print, copy, scan, and fax just like a multi-function copier but at a slower speed. Make sure to look for a laser all-in-one copier rather than an inkjet copier, because inkjet ink is more expensive than laser toner. Inkjet printers have a price per page of around 20 cents, compared to laser printer pages which costs about 6 cents a page.
How much is the average length of a copier lease?
Most leases conform to 12,24,36,39,48,60 and 63 month terms. The most common lease chosen in the industry is 36 months FMV.
Should I lease an inkjet, laser copier, or digital copier? What is the difference??
Inkjet copiers or printers are never a good idea for any size of business because they are the most expensive and have the worst visual output. Inkjet devices have a cost per page of about 20-32 cents, per color page, while printers from a laser device costs about 6-9 cents per color page (b/w is approx. 9 cents on an inkjet and 1 cent or less on laser). Inkjet devices are also a lower capacity output, meaning that you’ll have to replace paper and ink two to three times more than a laser.Inkjet cartridges can also dry up if not used, which can lead to a repair of the ink head and a replacement of the costly cartridge. Last but not lease, inkjets are SLOW! They only real use inkjet devices have are for home or consumer use that is very infrequent. To sum it up, they don’t make any sense for a business whatsoever.
A laser copier or printer is the most popular choice among businesses because they print / copy at a faster speed and require toner (which costs less per page than inkjet devices). Not to mention, laser printer copiers produce much higher-quality documents (which should be important to you if you’re often printing presentations or contracts). Also, toner is dry- so unlink inkjets, it will never dry up!
Most of today’s business or laser copiers are also called digital copiers. By “digital,” this means the device includes an internal scanner or fax, meaning the machine can scan and store documents. Scanning is very common these days as faxing is almost obsolete. This is very useful for most offices because devices can scan a document and then either store it immediately, fax it immediately or email it right from the copier. Once a document has been converted to digital, it can then be archived on your computer or server instead of a paper filing cabinet. What is even more important about this element is the retrieval process of that document when it is needed. It can be found with a simple keyword within that document instead of digging through paper files. Think about that- what if someone misplaces an important contract in your filing cabinet? It could take you hours or days to find it. Digital never has that problem because a simple word will retrieve the document for you.
At the time of this article being written (March of 2012) I am quite confident that no one is producing analog copiers any longer. The difference between analog copiers and digital copiers is the technology. Analog copiers would have to scan a document ten times, in order to make 10 copies of it. A digital copier can remember the scanned document and make 10 copies of it after scanning it only once. Additionally, analog copiers could not print, scan or store documents.
How to get out of a copier lease (or how do I terminate, cancel or end my current copier lease?)
Since we are in the business of leasing office equipment, we have very detailed knowledge in this area. There are several things you can do, or look for that may allow you to exercise the termination of your lease. We will absolutely need to review your current lease, which you can email to us at firstname.lastname@example.org, be sure to include your information so we can respond with our instructions.
If you need to write a termination letter at the end of your lease, we have a lease termination template letter that is already written and covers everything you need to state to legally end your lease.
Renting a Copier for Your Business
Renting a copier is great if you are sure you only need a machine for short duration and will not have a need for its use again over a long duration. Renting is very popular with trade shows, accounting practices during tax season or law firms who take a large case and need additional resources quickly. Typically renting involves a monthly rental fee that is fully inclusive of a pre-determined page/copy volume, toner, parts, labor, service etc. There is also a delivery and pick up fee that applies as well.
Rental is a form of financing the acquisition of a copier that relies on spreading the cost across a number of payments over a fixed rental term. Similar, but slightly different to a lease plan. Rental differs from a lease plan in that there is no residual amount that can be paid at the end of term and assume ownership of the unit. Usually, the unit is returned to the vendor.
Buying an Office Copier
Buying equipment is easy–you decide what you need, then go out and buy it. When you buy the equipment outright, you determine the maintenance schedule yourself.Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year.
Copier Service Agreements
Service agreements are the second largest decision to make when purchasing a copier. Service agreements are basically a warranty for the equipment that you pay monthly, that includes a certain page volume and all toner, parts, labor and consumables. In most cases it includes everything but paper. Many buyers get easily misled here with service contracts; you do not need to lease a machine just to get a service contract. You can still get a service contract if you purchase a machine as well. Many dealers will bundle a service contract into the copier lease but this is NOT a good practice. Here’s why-
You get one invoice every month instead of two.
- The page volume is set in stone at the time of the lease inception (so, if you “think” your volume will be 5,000 b/w pages per month and 1,000 color) then you sign your life away when you sign your lease. If you are wrong, and your true volume turns out to be 3,000 b/w and 100 color, tough cookies! You signed up for 5,000 and 1,000 so that is what the bank will bill you for. This is often discovered after a few months into a lease, where a desire is expressed for change, but tough cookie. The bank doesn’t care and you signed a contract which means you must pay it.
- You get 2 invoices every month instead of 1.
Here at A1 Image, we believe in the most ethical approach, which is NOT bundling your service contract into your lease. You ONLY pay for what you use!
What speed copier should I buy or lease?
This is where people find themselves in “analysis paralysis”. What speed, what features, paper size, etc. This can be confusing and overwhelming at the same time. Most machines come standard with all of the bells and whistles (Duplexing, Collating, Stapling, Scanning, Faxing, etc.) If this will be your office’s first copy machine and your volume is around 3-5K per month (for color and b/w) then you should be fine with a machine that prints between 20-30 ppm (pages per minute). Keep in mind that 30 pages per minute means you get 1 page every 2 seconds. What you need to do is really ask yourself and your staff what is most important to them when printing or copying, what they do with that job after it is printed or copied and how can this machine make you or your staff more efficient? Our line of machines allows you to scan right to email from the machine, scan to a thumb drive, scan to your iPhone, print from your iPhone and more.
If you own a law firm or a high-demand need for copies or prints, with several users on staff who use the machine frequently then you should get a faster machine; at least 40 pages per minute and as high as 70ppm.
**Ultimately, a few simple rules of thumb may help you decide. If your equipment requirements are relatively small and you have the money–or can get a low-interest loan–then just buy it. You’ll save money in the long run. However, if you require a substantial amount of equipment, such as computers for your new company’s 10 employees, leasing may be a better option.