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Oct 22 2018 | Anne Edwards

De-mystifying photocopier leases!

When you need a new business asset, one of the primary considerations will be how you are going to finance it. That decision may depend on a number of factors – not least the cost and lifespan of the asset itself.

If that asset is a copier / printer (also known as a “multi-function printer” or MFP) then a common method of financing the item is through a lease.

Leasing has become a fairly “traditional” type of finance for assets such as vehicles and photocopiers, which a business might not necessarily want to own. That may be because newer and better models are coming to market all the time, and wear and tear on an older item makes regular replacement an attractive option.

Leasing agreements for MFPs are typically structured over three or five years. They involve quarterly or monthly rental payments, and at the end of the agreed term the item is usually returned, to be swapped out for a newer model – although there may be an option to make a final payment to acquire ownership, if you decide that you want to keep it for longer.

The financial benefits can include tax relief and spreading the VAT payments.

Lease finance is pretty straightforward, but with copiers / printers the lines can become somewhat “blurred” if support contract charges are built into the lease.

It is normal, when acquiring a new MFP (and regardless of whether you’re leasing or purchasing outright) to be offered a support contract.

That contract typically provides machine maintenance, parts and consumables such as toners, in exchange for a monthly fee. The monthly fee is based on the number of pages that the machine produces. You pay more if your device is running a high volume of prints, because the machine will need more toners and potentially more frequent servicing and replacement parts.

Some copier companies offer “deals” which roll your lease payments and support fees into one. They calculate an expected volume of monthly prints, multiply the associated charge by 36 or 60 months, add that to the capital cost of the MFP itself and finance the total amount on the lease. Although that means just one payment per month or quarter (which will be sold as “easy budgeting”) the downsides are:

• Paying more than you need to. You will be paying interest on three or five years’ worth of support fees, which would otherwise have been a monthly cost without interest.
• In order to make the deal attractive to the provider, it is likely that your projected monthly print volumes will have been over-estimated, meaning that you pay for more pages than you actually use.
• Conversely, if the print volumes have not been over-estimated, you may find that if your actual usage exceeds the estimated quantity, then you may be charged for “overage” prints.
• It becomes difficult to differentiate between the finance for the machine itself, and the ongoing service costs. That is particularly relevant if your actual print volumes change during the term of the lease, or if you try to pay off the lease early, or if you wish to keep the machine after the finance has ended.

Our advice

Before you sign up for a new multi-function printer:

1. Discuss with the supplier exactly what your requirements are, in terms of functionality. There is no point going for the highest specification machine if you’re not going to use everything that it can do – but equally you don’t want to be stuck with a device that is too basic for your needs..
2. Even if you’re planning on leasing, get a quote for the capital cost of the device, too. That enables you to quantify the finance costs, as well as helping you decide whether outright purchase would be a preferable option.
3. Keep the support contract separate from the lease finance, to maintain flexibility and ensure that you only pay for the pages that you use.
4. Talk to HJS Technology!