Why would someone choose to lease equipment? What is the benefit?
The main benefit is capital outlay. Unlike bank loans which often require a very large percentage of the loan to be paid up front, a lease for business equipment is generally just 2 payments at the maximum. This keeps the money you have in the bank or being invested in the business instead of outlaying huge chunks of money to a vendor.
Another reason people lease is because they know without leasing, they are likely to retain old and inefficient equipment many years longer than they should (like they do with printers…) and this guarantees they have to replace the copiers on a consistent and logical basis for their business model.
Finally, leases can help the tax side of your company by allowing you to fully deduct payments as a business expense rather than having to depreciate the value of the equipment over a numer of years. Talking to your tax professional would make sense if you want to see how getting a copier lease would affect your taxes.
The detriments are that you are generally stuck with one vendor and are in a non-cancellable contract. You also MUST keep the equipment under a maintenance contract and are generally not allowed to shop around for better maintenance rates, and finally you pay a lot more money than you would if you paid outright because you have interest rates, shipping costs back to the leasing company, etc to pay for.
If you decide that you do not want to purchase a copier outright and that you want to lease the equipment, then here are some things you need to understand:
The first crucial thing you need to understand is the difference between a Fair Market Value (FMV) lease and a $1 Buyout Lease.
FMV Leases – Basically, what an FMV lease is an agreement to pay for the use of the equipment over an agreed upon amount of time (12, 24, 36, 48, 60 or 63) months and at the end of this time you can keep the copier if you pay the Fair Market Value according to the terms of the contract. The holder of the lease paperwork is the one who decides what the Fair market Value is. They will give you a buyout number, and you can pay that number to keep the copier or you can return the copier at the end of your lease as agreed upon in your lease paperwork.
I personally would shy away from 60 or 63 month leases. Most people are going to want to replace the copier around year 4 and there is no reason to have to buyout the lease if you decide that you are ready to move to your next copier. Copier companies generally like using the 60 or 63 month leases because it makes the equipment monthly payment lower. As a customer I would choose a 36 or 48 month lease in almost all cases.
A $1 Buyout Lease means you pay for the equipment according to the terms of the lease and after you have completed your contract, you can pay $1 and the equipment will remain in your possession. This option works if you are definately planning on keeping the equipment after the completion of the contract.
Please feel free to contact us if you desire more information or help getting a copier for your company here in the Denver/Front Range area.