A copier lease is one of the most common contracts a business signs, yet it can often be one that people understand the least. Beyond the obvious monthly cost, there’s a myriad of extra things to consider, like types of lease, hidden fees, automatic renewals, insurance premiums, and much more. Read our article on the five top things to know before signing, to better equip yourself and not get trapped into a copier lease that ties you up with fees and clauses, when it should be adding value and freedom to your business operations.
1. FMV vs. $1 Buyout
There are two main types of leases you can choose from: Fair Market Value (FMV) and $1 Buyout (Capital Lease Agreement). They differ not only in monthly cost but also in the financial obligations your business faces at the end of the term.
An FMV agreement will usually have lower monthly payments; however, the rub is that the end purchase price is not fixed, but subject to Fair Market Value at the end of the term. The risk with this lies in the fact that, if you change your mind or find that you need to keep the equipment at the end of the term, you may be subject to a large balloon payment, with the risk that the lease company artificially inflates the market value.
The solution to this is to ensure that the lease has a clause that allows you to use a third-party to value the equipment, avoiding any overinflated prices.
In contrast, a $1 buyout style agreement guarantees ownership at the end of the term for a nominal fee of $1. The drawback of this type of lease, though, is that the monthly payments will typically be higher. This option does present the business with the burden of ownership, with associated future maintenance and eventual disposal costs to think about.
2. Lease vs. Service Agreement
Many businesses don’t fully appreciate the difference between the lease itself and a service agreement. The lease is the financing of the copier, whereas the accompanying service agreement is for maintenance, toner, parts, and labor. Fully understanding the finer details of this distinction is crucial for making sure there are no surprises at any point during the term.
Things to look out for are hidden charges for shipping toner or “minimum click” charges, which mean you commit to a minimum volume of monthly paper copies and frequency of toner replacement, regardless of whether you hit that threshold or not. You certainly don’t want to be paying for a 90-page-per-minute machine contract agreement if your company only prints 1,000 pages per month. Effectively, you could end up with a stock cupboard full of extra toner that you won’t get through, that the lease company won’t accept back.
3. Termination and Renewal Clauses
One of the biggest risks that companies fall foul of is the Automatic Renewal Clause (ARC). Often, lease companies will build an automatic renewal into the fine print of the contract, which will kick in if you don’t explicitly give written notice of your intentions, often within a narrow window of time. Typically, the renewal will be for an extended period of 12 months, and customers often get caught by simply overlooking the process of notifying their intention not to renew. This can apply to service agreements, leases themselves, or just deliveries of toner. The best advice is to set clear calendar alerts far in advance of any associated deadlines.
If you forget to cancel an ARC in time, you will usually be subject to harsh termination penalties, which can often be equal to 12 monthly payments, so the only solution is to make sure you remember to give that clear written notice of intent.
4. Understanding Lease Escalations
It’s also worth keeping in mind that costs can increase over the term of an agreement. Service costs might increase due to market fluctuations and inflation, and you won’t always be made explicitly aware of this. Because inflation isn’t predictable, the best advice is to look for a contract that caps these kinds of escalations. For example: “Service costs will not increase by more than 7% annually.”
5. Exit Strategy and Other Hidden Costs
What actually happens at the end of a lease term is often something that is largely overlooked and not covered in the main agreement paperwork.
There are basic logistics that may not have been covered, like: who is liable for the costs of shipping an obsolete 400-pound machine back to the leasing company when the term ends. Worse still, you could be paying to ship a damaged, beyond-repair piece of hardware, which would truly represent completely wasted money.
Not only this, but there are potential costs to keeping legally compliant, too; a copier is essentially a giant hard drive, and there’s going to be associated costs and liabilities with ensuring data is wiped clean to remain HIPAA and SOC2 compliant. If the onus sits with you, the customer, this might require the use of a third-party data handling provider, at extra cost to you.
There may well be other hidden fees that get passed through to you, often without being explicitly stated before signing a lease agreement. This can include taxes and certain mandatory insurance charges, for example. It may be necessary to prove that your own company insurance adequately covers the hardware, and failure to do so could trigger insurance premiums and charges set by the lessor at unfavorably high levels.
Partnership Over Paperwork
At the end of the day, a copier lease should never be a “gotcha” moment because it’s so confusing that you get tripped up as a customer, overpaying, or getting saddled with expensive, obsolete equipment, with hidden fees and auto-renewal clauses.
A lease should be a tool for the growth of your business, giving you exactly what you need in terms of hardware, without destroying your cash flow.
Don’t get trapped into a contract that doesn’t deliver the services you need. Request a free print assessment from Metro Sales to discover how we can help your business in the Burnsville, Twin Cities, Fargo, Duluth, and St. Cloud areas.