Are you looking for the best copier lease for your small business? If so, you'll want to avoid some very common mistakes that a surprising number of organizations making when leasing their copier.
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 pitfalls that organizations are tripping over when executing their new copier leases - but, thankfully, they are easy to avoid.
By avoiding these copier lease pitfalls, you'll ensure that your business is able to save money and make the right copier choice for your business for both now, and the future of your company.
With that in mind, OT Group has listed the five most common pitfalls associated with copier leases here, which your business should ensure it avoids. Before we get into that, let's first take a quick recap of what a copier lease actually is.
What is a copier lease?
A copier lease is fairly straightforward. Think of it in a similar type of agreement to a car lease. It gives opportunities to fund new copier equipment without having to pay the full fee upfront. Instead, the cost of the device is divided over a specific period of time, normally between one to three years, by the leasing company.
The copier equipment belongs to the leasing company, but you can typically buy it out after the lease agreement is over.
As part of the leasing agreement, the business pays the leasing company a fixed amount, either quarterly or monthly, until the full payment has been made. This is beneficial for organizations that don't want to pay for full price of the copier upfront, and instead can distribute that payment over a longer timeframe.
Copier lease payments are based on the value of the machine divided by the number of payments schedule over the life of the lease, plus interest. In most cases, the cost of a copier lease is normally around $100 to $400 depending on the copier that is required.
It's important to remember that leasing is different to rental. Copier rental is a short-term contract that typically spans month-to-month, whereas leasing is a legally binding contract for the duration of the payment period.
The benefits of copier lease include:
- The option to buy out the device at the end of the lease, for a reasonable market value.
- Upgrading incurs little to no out-of-pocket expense.
- You have no large upfront fee to acquire the best copier for your small business.
- It qualified as a business expense rather than a depreciating asset.
Avoid these 5 common copier lease pitfalls
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 or 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.
.png)
