5 Common Copier Lease Pitfalls Your Business Should Avoid

Posted on Aug 13, 2019 3:37:37 PM

Despite copier leases being some of the simplest financial documents that your company will ever execute, many businesses are continuing to misunderstand these documents. In fact, there’s a variety of landmines that organizations are tripping over when executing their new copier leases - but they are easy to avoid.

OT Group has listed the five most common pitfalls associated with copier leases here, which your business should ensure it avoids:


1 - End of term termination, return and inspection fees

In virtually all copier leases, the lessee has the option to terminate the lease agreement at the scheduled maturity date as long as the lessee notifies the lease company in writing. Usually, these instructions must be sent somewhere between 30 and 90 days prior to leases original maturity date.

It is important to note the cost to return the equipment to the lease company is the lessee's responsibility - here at OT Group we have seen rates as high as $1,000 per unit.

To avoid the expensive return fees, many lessees arrange to return the product via their own shipping method. Recently, we've seen a new fee start to become common, the lease return inspection fee. Even if you pay to return the product by your own methods, we are now seeing fees of up to $1,000 per unit to inspect the machine to make sure it's in good condition.


2 - Purchase option

In most leases, the lessee has the option to purchase the copier at the maturity date. So long as all financial commitments are made, you can expect a fair market value (FMV) purchase option.

It's important to note that while the vendor/lease company ultimately set this price, the lessee can frequently negotiate a more competitive one. Make sure when you are signing your new lease to ask for guaranteed purchase price options as well.


3 - Evergreen clause / renewal options

As a lessee, you need to understand what an evergreen clause is because virtually all leases have one.

In most cases the wording goes something along the lines of “this Agreement shall automatically renew for another one (1) year term, unless either party provides notice to the other of its intent to terminate this agreement not less than thirty (30) days before the end of the then-current term.”

There are many different names for the evergreen clause, but essentially the work to keep the contract alive for longer than the original contract duration. Understand how the contract you are signing works to avoid additional financial commitments at the end of the lease's term.


4 - Copier lease agreements require you to add the lease company as a sole loss payee

As a lessee, you must prove to the lease company that you have them named as a sole loss payee on your lease equipment, in case of fire, theft or other damage. This clause isn't a problem as long as you are aware it's there. If not you can end up paying 5-10 per cent in insurance premiums to the lease company.


5 - Initiation and credit check fees

Frequently, leases have both lease initiation fees and credit check fees. Make sure you are aware of them as they are a one-time uplift fee on the first lease payment. These fees combined can be in excess of $250. This fee is generally not negotiable and catches most lessees off guard when it shows up on their first invoice.

In reality, none of the terms and clauses on a standard copier lease are draconian. However, it is important to understand them prior to committing to your new lease or you could be in for a surprise.

Looking for more information on copier leases and how they work? Feel free to contact the OT Group team of experts today. We would be more than happy to answer any questions you have.

Topics: Office Technology