How Do Copier Leases Work? 6 Things You Should Know

Despite the fact that the world seems to be moving towards being paperless, business owners will often find themselves in need of a copier. And while they’re still called copiers, they do much more than just copy these days; they can scan documents into emails or PDFs, resize documents or images, collate, staple, hole-punch, and more.

For most businesses, the question isn’t if they need a copier, but rather how to get the best deal on a copier when negotiating new copier contracts.

There are many pitfalls in copier lease contracts that organizations need to be leery of. If you’re interested in learning how copier leases work, keep reading for the six things you should know.

How a Copier Lease Works

A copier lease is when a company, instead of purchasing a copier, rents it. The lease payment would include the cost of the copier, plus interest, divided over the term of the lease, usually 36, 48, or 60 months.

There is also a maintenance agreement, sometimes bundled with the lease payment, but usually billed separately. This would typically cover all copier parts, labor to fix the machines, and supplies (toner, not usually staples of paper).

The maintenance usually is computed as a cost per copy/print. Sometimes copier dealers include a fixed number of copies/prints in your total contract price. Don’t be fooled, you are still paying for the copies/prints that are included in your contract.

Additionally, if you fall short or don’t use those copies/prints included in your contract, you are basically paying for services not used. It is best to have a maintenance contract that either bills you only for copies/prints used or one where you have overage charges (cost per copy fee for copies/prints over contract included ones) ensuring you are using all the copies/prints in your contract.

For most leases, at the end of the lease, the leasing company owns the machine, not you. The lessee (you) are responsible for 3 things:

1. Pay the sum of your lease payments (but not early or you may have a penalty);
2. Give the proper notice to end your lease (written in the terms of your contract); and
3. Return the machine to the location provided to you by the leasing company (yes, you are typically responsible for shipping your copier(s) wherever dictated to you by your leasing company).

Copier Leasing vs. Cash Purchase

Businesses have two choices for purchasing copying machines: leasing (renting) or cash purchase. When you pay cash for a copy machine outright, you’ll spend less for the machine, as you won’t have any financing fees, but you’ll have to come up with more cash upfront. With a large fleet of copiers that could be very expensive and not budget-friendly for most companies.

Additionally, you will still have to negotiate a maintenance contract for your cash-purchased machines. Those maintenance contracts will often have pricing escalators in them that would increase your maintenance costs each year — potentially to a point where they would cost significantly more than maintenance on a new machine.

This will force you to upgrade to a new machine at about the same time as someone who leased a machine. Therefore, paying cash is often not the best choice for companies if you are able to negotiate a lease-purchase correctly.

6 Things You Should Know About Copier Leases

Consider these six factors to make the process more straightforward when shopping around.

1. There Are Advantages of Leasing Over Buying

If you’re still on the fence about whether leasing is the right move, you’ll be happy to hear that there are many advantages to leasing over buying. For starters, leasing allows you to use the capital cost of the equipment that would have been spent buying it on other projects.

The copier companies also offer service agreements, helping with maintenance and upkeep. These periodic payments can help you budget, and you’ll be able to avoid a large down payment upfront.

2. You’ve Got Options

You have some options when deciding which copier lease to choose:

• Fair Market Value Leases: The most common type of lease is a Fair Market Value (FMV) lease. These will have lower monthly payments, but the lessee has no ownership of the property. These leases won’t show on the balance sheet of a business and have no rent-to-own agreement, making them ideal for owners who never want to own the copier.
• $1 Out Leases: Companies that would like to own the copier one day might consider the less common option, a $1 Out lease. It’s called this as you own the machine at the end of the lease for $1, meaning the entire amount of the machines was financed over the lease. Monthly rates will be higher, but they will go towards the price of owning the machine at the end of the lease. That said, there is little benefit to owning a copier long-term. The older the machine is, the higher a copier company will typically charge for the maintenance contracts which can easily exceed the lease price. By upgrading the machine every 4 or 5 years, and altering the price escalation terms in the contract, a company can avoid such costs.

3. Usage Is an Important Factor

There are hundreds of different types of copiers out there, all with different functions and technology. Before you get excited and go with the newest, shiniest, high-tech machine available, take a hard look at what your usage will look like.

Does your business need color printing or would black and white only be ok? Do you really need an expensive sorter/stapler option? You need to make sure to select the proper size (speed) of the machine, and not go overboard with extra whistles and bells that can cost a lot of money in the end.

4. Terms and Conditions Can Be Negotiated

When considering a new lease, one of the biggest mistakes that organizations make is not making changes to the “Terms and Conditions” of the new lease. These T’s and C’s are the fine print in a lease contract that are written so that they are highly favorable to the leasing and copier companies.

There is a level of flexibility that the leasing and copier companies have in copier lease negotiations. The larger the deal the more they are likely to allow certain contract changes. If your organization would like help with negotiating these contract terms, companies like P3 Cost Analysts have experienced staff skilled in such contract negotiations. Either way, make sure to read the lease terms and conditions so you don’t get locked into an unfavorable lease.

As with most leases, there are quite a few terms that need to be negotiated and agreed upon. At the end of the day, your contract is legally binding, and you’re responsible for that monthly payment for a certain length of time. Make sure you look through your lease agreement carefully and that you fully understand all the terms stated.

Keep in mind that you can negotiate with the leasing company while discussing the terms, but always confirm that the contract reflects what was agreed upon. Here are some of the main points you should check out before signing any agreement.

• Lease Term: How long does the lease last? Typically, a longer lease will have lower monthly payments but consider you’ll probably pay more throughout the entire length of the lease. With too short of a lease term, you may end up sending a machine back, that you have effectively paid for, with much of its life still left on it. To maximize the utilization of a machine, we typically recommend organizations lease a copier 5 years. A shorter lease term might be recommended for high-use machines.
• Payments: How much are you responsible for paying each month, and what does it include? Make sure that your monthly invoices don’t have additional fees that were not agreed to in the contract.
• Service Contract: Do they offer a service contract? Is it bundled with the lease agreement or separate? How much are you paying if you go over a select number of copies? Do you get credit if you don’t use the minimum amount of copies that you pay for? Are you charged for the shipping fees when toner bottles are needed?
• Insurance: Is insurance on the equipment required? Is there a surcharge included in the contract? Typically, the copier can be covered under your general business insurance policy, but if you don’t notify the leasing company, they will often add a more expensive insurance premium to the cost of your lease to cover your copier.
• Cancellation Notice/Automatic Renewal: Will the lease automatically end after the contract expires, or do you need to notify (in writing) the leasing company that you don’t want to renew? Typically, you will see odd things like “No sooner than 90 days, but no later than 60 days before the end of your contract can you give a notice of intent to cancel”. The leasing companies do this as they would rather you miss the cancellation notification date and have your lease renewed for another year automatically. You end up sending them 1 more year of payments on a machine that was essentially paid for.
• Buyout: Will you be able to purchase the equipment at the end of the lease? If so, will you be charged fair market value, or is the contract rent-to-own?
• Adding Equipment: If your business grows, you might need to add additional equipment. Will the lease company amend your lease? Normally there will be a master agreement and subsequent lease addendums for additional machines added.
• Shipping: Are you responsible for the return shipping costs at the end of the lease? If so, how much will it be?
• Early Termination: What happens if you no longer need the equipment? Is there a penalty? Almost always you will be responsible for paying the sum of the remaining payments. However, you may want to make sure that you won’t have additional penalties for paying off the machine early.

5. You May Benefit From a Buyout

There are plenty of reasons you might want to get out of your current agreement, but it can be a very expensive process. If your business has outgrown your current equipment, you might get some help in the buyout process with the leasing company’s competitor.

A prospective copier dealer may offer to buy out your current lease to secure your business with them. This is the perfect move for business owners who need to upgrade their equipment and have 23 months or less on their contract. Terms vary, but typically you will be trading your current lease for a new, more favorable one with the new supplier. In turn, they bring in your business and acquire new equipment.

For some other potential options for getting out of a copier lease early, check out our article on How to Terminate a Xerox Lease Early.

6. Tax Implications of Leasing Vary

When buying a copier, it can be claimed as depreciating assets on your taxes. That being said, many leases can also be claimed similarly. For example, capital leases are often qualified as depreciating assets if they meet all the proper criteria.

Copier leases can also fall under Section 179 deduction, which can save small and medium-sized businesses some money during tax season. It’s always best to consult with a tax expert when weighing the options between buying or leasing business equipment.

Let P3 Help You Save On Copier Expenses

Whether you’re just starting to shop around for printing services, you’re coming up on the end of your lease, or trying to get out of one early, let one of our managed print auditors help you save money. We can help you manage the cancellation of your lease without penalty and negotiate a new lease to avoid unfavorable terms for you.

If you’re interested in having P3 Cost Analysts take a look at your copier lease agreements to see what options are available to you, feel free to reach out today for a free copier contract and savings estimate audit.

The Bottom Line on Copier Leasing

Depending on your business’s needs, a copier lease might be more beneficial than buying one outright. There are some advantages to leases, like saving the capital investment and having a service agreement with the leasing company.

When shopping for leases, consider which type of lease makes the most sense for your needs, the fine print of the lease, and the tax implications of leasing over buying.

Only you can decide whether leasing copiers rather than buying them is the best business decision for your company. Make sure to consider these six factors when weighing your decision.