One of the most common questions I get is, should I lease my copiers and printers or outright purchase the equipment. Buying a copier or MFP (Multi-Function Printer) can be an expensive undertaking: mid-level MFP’s range in cost from $3,500 to $10,000, with higher-end models exceeding $25,000. However, printing, copying and scanning are absolute necessities for running a business so the question becomes how does a company pay for this necessity?
I strongly believe, in most cases, leasing your office technology makes sense for the following reasons:
- Technology and your business change quickly, utilizing leasing allows your company to not get “stuck” with obsolete equipment. When you lease, you have the ability to upgrade to the latest model. Technology gets faster, smaller and less expensive with every improvement. Leasing allows you to afford newer office technology and access to the latest improvements.
- Lower short term costs for your organization. Payments become manageable fixed costs for your company versus a large, full cost upfront for a necessary component of your business processes.
- Your business line of credit (the all important cash flow challenge) and possible tax savings are important to all companies and leasing equipment helps both. Leases are not bank loans, so your company’s lines of credit can be put towards things that help you grow your business. Often lease payments can be deducted as business expenses and you don’t have to worry about any depreciation issues.
Third party leasing companies have traditionally been the preferred way of office equipment companies to do business over the years as leasing has become more and more prevalent. Typically, leases range in duration of 36-60 months for office equipment and the lease term is usually Fair Market Value (FMV) or $1 out.
There is a difference and it is extremely important to know this difference, FMV leases are the most common leases executed within the office technology industry. FMV means at the end of lease term (36-60 months), the customer (Lessee) has the option to purchase the equipment at its Fair Market Value. This is an “appraised value” that is determined by the bank issuing the lease (Lessor). A $1.00 out option is almost identical to a FMV with two major differences. Once your lease ends, 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 versus the end of the term, in this case $1.00. So, you own your copier/printer for a $1.00 when your lease is over. The other major difference is your monthly payments will be higher with a $1 out lease than they would leasing it as a FMV.
While this option satisfies the financial end of the equation, it leaves a serious disconnect between the financial and service end of your needs. You now have to manage multiple invoices; one for the lease payment and one for the service agreement of your investment. Because these entities have no shared concern over your company, your are left to do deal with more people and multiple companies (In over 20 years in this industry I have never met anyone who was just hired to handle their companies office equipment, so I am sure you the last thing you need if more people, contracts and companies to deal with).