The common misconception about investing in a new equipment such as a photocopier or a multifunction printer is that it is expensive. Many business owners don’t know that aside from purchasing, they have the option to rent or lease one. Here we give you the rundown on rental versus leasing a photocopier.
In a lease agreement, the client agrees to pay a monthly fee for a specific period of time. The client saves money that would otherwise be used to purchase a brand new machine. This money can therefore be used for other purposes. On the other hand, the lessor covers the repairs and maintenance expenses.
When you lease a copier, you have an extended payment option with flexible payment terms. There is no capital expenditure. You don’t have to pay the cost of the machine upfront. You can pick anywhere from 12-64 months lease. The payment scheme allows you to easily manage your funds while being 100% tax deductible. You can reclaim the entirety of your payment on a quarterly basis. There is an FMV option in leasing. FMV stands for Fair Market Value. At the end of the lease agreement, the customer has the option to buy the machine at its Fair Market Value at that time. The machine needs to be appraised in order to determine its value. This is determined by the lessor.
You can avoid using up your capital needlessly through leasing. You can invest in more beneficial projects if you lease because you can budget your money better. Your existing credit lines can remain intact.
It is also tax efficient. Your lease payments may be deducted from your taxable profits if you are paying corporation tax. This reduces the net cost of leasing your equipment. When you buy, you can claim 40% of the purchase price against tax in the first year. Thereafter, you can claim 25% of the outstanding balance. When you lease, you don’t have to pay the cost of the equipment immediately so you can reclaim everything you pay on a “by payment” basis, either monthly, quarterly or annually.
Clients may need to sign a 3-5 year agreement. They may also be charged a significant fee in case they want to change their equipment or terminate their contract. Leasing agreements are also not very flexible.
If your company closes or you need to upgrade or downgrade your machine, you may be burdened with the lease payments until you fulfil your contract.
Rentals are actually a bit similar to leases although they are more flexible. The main difference is the time frame involved. Rentals are usually on a month to month basis. The company renting can also upgrade or downgrade their equipment when needed. They can also cancel their agreement as long as they give a notice beforehand, usually 30 days. This is great because with the advances in technology, the latest photocopier now may be considered obsolete next year. A company that owns its machines can only upgrade by disposing or reinvesting their existing asset. Some suppliers include provisions to trade up to a higher model. You have the freedom to upgrade without buying a new one.
Your rental agreement will cover service plus parts and supplies. That means no unexpected repair costs. Sometimes the contract also covers toner replacement. You will cover the paper and staple expense, of course.
Maintenance and repairs are not a problem. When you call your supplier for help, an engineer will usually come within a few hours. A next-day guarantee is also usually provided.
Renting allows the company to use a better, sophisticated copier than what they can truly afford. You can order the latest MFP without worrying about the price.
Rentals can also benefit new businesses tremendously. They can use their limited capital to invest in more important things and at the same time, be able to have the equipment they need in order to do their daily tasks.
Photocopier rental allows you to keep up with the latest technology trends and enjoy the greatest advantage all at a lower risk and expense.
Over time, renting a photocopier is more expensive than buying a good model outright. The payment terms are also higher than leasing because the agreement is shorter. Although more expensive, if you are not 100% sure that you will use a brand new machine over a long period of time, renting is a better option.
Should I rent or lease?
This is a difficult question to answer. Usually, it makes sense to lease a copier if you are confident that you can pay your monthly lease fee on time each month for the entire duration of your agreement. Leasing is also a good option if you are trying to conserve your capital.
Renting is great if you are sure that you only need a photocopier for a short duration of time. It is popular for companies that work on a project basis. It involves a monthly rental fee that includes a pre-determined number of pages or copy volume, parts, labour, service, toner, etc. You may be charged for a delivery and pick up fee though.
From a tax point of view, consult your accountant to determine the best form of payment you can get that is most cost effective.
When should I NOT lease a copier?
If you have a new business and you are worried about long term survival, leasing may not make sense. Remember that you will be tied to a long-term contract that is almost impossible to break. You may also have difficulty to get approval from a bank to lease. If you make less than 700 copies per month, it also does not make sense to enter a lease contract. You should just consider buying a desktop multifunction printer to do your daily tasks.
What is the average length of a lease?
The following are the most common terms (in months):
36 months is the most popular among companies.
Who gets the equipment at the end of the contract?
The equipment still belongs to your provider.
How do I get out of a contract?
Before deciding to get out of the contract, be sure to review your contract thoroughly at the beginning, before you sign the contract. It can be extremely difficult to break should you be unable to pay the monthly fees.
You should watch out for automatic renewals. Most leasing companies auto-renew your contract. You should also know your window of opportunity to get out of the lease. This is important so you don’t renew your agreement before you actually need to.
Bill your maintenance contract separately from the machine itself. You can get tied to the machine purely because your maintenance agreement lasts a long time. This can be a problem if your unit has become obsolete or is no longer working properly.
If there is even a slight chance that you may want to get out of a lease contract, opt to rent instead or buy a used model.
What information do I need to know to compare contracts?
There are a few things you need to know before speaking to a vendor. First, your copy volume. Leasing contracts vary between 5,000 to 50,000 pages and up. If your demand does not fall within this group, you should consider renting a smaller model or buying a larger model outright.
What kind of organisation do you have? Leasing companies may offer discounts to non-profit organisations, charities and government departments and some public service sectors. Mention this to the leasing company as you may get a better deal.
You should also have a wish list of the features you need such as duplex printing, automatic document feeder, etc. and finishing features such as stapling. You should also mention if you want a multifunction printer that has the ability to scan, fax or send email.
The price really depends on the supplier and the model of your machine. A mid volume copier usually starts at £50. Remember that you may be charged extra if you go over your monthly copy limit.