Rent Copier vs Lease Copier vs Outright Purchase of a Copier

Rent Copier or Lease Copier, we get asked this question daily. When the time comes to purchase a photocopier, scanner any piece of office technology, you will want to understand the advantages and disadvantages of taking on a finance option. In the Office equipment industry, 9 times out of 10 you WILL be presented with finance options, it’s the standard for how most office machines are placed into business all over the world. When comparing whether to rent or lease a copier vs buy a copier, there are several considerations which may direct you in one direction or another. So let’s take you through some key point between them.

WHO OWNS THE COPIER AT THE END?

Purchasing is simple, you have full ownership of the equipment with a capital outlay. Finance options however is one of the biggest miscommunications we see between customers and copier businesses. Almost every week while working in the copier industry, clients would tell me they thought they had ownership of their machine after their contracted finance term, however, technically, in a rental, the copier is still owned by the dealer or finance company that issued the rental contract. A lot of times the company that offers you the rent copier holds an agreement with the finance company which allows them to retain ownership of the device after you finalise the payment term but will then continue to bill you your monthly rental until such time as you upgrade the device. Think of it like your phone plan, after your contracted period, your phone supplier still charges you the monthly plan for as long as you stay. In either case, you do not own the rent copier in a rental situation. There is however an option to “lease” a device in which the payments are structured monthly, much like a rental agreement, but a lease will then have a residual amount payable at the contract end (usually a minimum of 10% of the total cost of the equipment), which is structured into the plan so that you can then take ownership of the machine at the end of the lease term.  What’s really important here, however, isn’t who owns the copier for the sake of ownership itself, it’s the tax implications of the fixed asset. See more on that in our next point.

DEPRECIATING ASSETS

There is a clear advantage to renting and leasing when it comes to depreciating the asset of a large machine. With a rental or lease, the entire copier payment is deductible immediately and, since you don’t actually own the device, it is not a depreciating asset. When you purchase a copier, printer, MFP or scanner, you have to capitalize the equipment as an asset and then depreciate them slowly over time according to the proper depreciation schedule.

ASSETS VS LIABILITIES

Under a typical rental scenario, there is no need to record future payments as liabilities, meaning that your business doesn’t incur the additional liability of a very expensive machine(s). That will typically free up more available credit for use in expanding or maintaining your business.

FOREFRONT OF TECHNOLOGY

Upgrades. At the end of a rental agreement you typically have the opportunity to roll the agreement into a one and receive new equipment. This can result in faster print or copy speeds, greater capabilities, or simply the opportunity for you to upgrade and better match your growing business needs. When multiple machines are involved, it’s often a great strategy to stagger the lease agreements so that you are almost constantly upgrading a machine every year. In this way, many businesses have ensured they have a more frequent opportunity to upgrade or bolster the capabilities of their workflow. With the lowering cost of office equipment and finance rates respectively, you will often find that your copier rep will present you with the option to upgrade your equipment before the finance term ends. This certainly adds to the significant advantages of renting or leasing a device.

It’s also important to know that if you purchase a device, the speed and specifications of the equipment are dictated upon the capital you have to invest. With both Lease and rental having monthly repayments, it’s much easier to afford a faster or higher spec machine which can allow your business much more efficiency and productivity. Again, an advantage of financing equipment.

WHAT CHOICE IS BEST FOR MY BUSINESS?

Yes, there are big advantages to finance equipment but every business is different. A quick discussion with your Accountant will quickly help you make a more business specific decision on how to best purchase your business equipment.

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Copier Contracts

Let’s be direct with this copier contracts as it’s a critical part of any copier decision you make.

As part of a photocopier service contract, the supplier of the machine WILL charge you a cost per page that you print. This is usually around the 5-8c mark for colour (A4) and .5 -.8c for black and white (A4) and will be billed to you in arrears each month above the cost of financing the machine. For regional areas, cost per pages can be around 15-25% more due to travel and supply costs.

What is included in the service contract?

Most suppliers will include; Toner, Drums, Parts, Maintenance, Repairs & Labour. What they don’t offer are the output products like paper and staples and any issues past the network point.

Service copier contracts are designed to be hassle-free and to allow you to focus on your business and not maintaining a device in your office.

What else should I know?

Fine print- Everyone loves getting a contract and reading through the terms and conditions but when it comes to a service contract for a copier, it’s critical. Why? In recent years, copier companies have added extra terms to their copier contracts which are heavily weighted to them as a result of print volumes declining from the use of technology.

Conditions to watch out for:

1. “Base charges” This means the supplier can at any time charge you a flat fee of their choice over and above the cost per copy- It’s not every supplier but it’s becoming more common.
2. “Increases” Yes the cost per copy WILL increase every year you have the device. This has been the case for many years as the cost of maintaining aging technology increases. A tip- Ensure you stipulate either a fixed period where you don’t get any increases or a fixed increase anywhere between 5-7% for the term of the agreement.
3. “A3 cost per page” Most suppliers will charge you the same rate as an A4 page but as the margin in print has reduced, some suppliers are now billing 2 x A4 sheets for a single A3 print to.
4. “Agreed volume” – This is a whole new topic in itself but if you rent or purchase a machine outright, you should NEVER commit to volumes. This will mean if you ever decide to leave or upgrade, you will be contracted to paying out not only the finance of the machine but also any unused “agreed volume”. These types of agreements are now rare but are in no way favourable to clients who rent or purchase outright.

There is always room for negotiation, don’t just negotiate on your box, make sure you consider at least 3 suppliers and then compare the terms of each to ensure you really do get value.

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Photocopier Speed

There is no magic formula for determining the right photocopier speed for your new MFP, printer or copier.  There are however broad guidelines based on the “technical” minimum to maximum output a device can handle at each speed range.

Although these monthly volumes Vs speeds are only an indication, other factors in the business are usually taken into consideration such as budget, productivity and comfortability with the general speed.

So lets take a look at the speed guides to choosing what speed of machine you should consider.

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Digital Transformation

In my day to day journey, I hear people say digital transformation is outright complicated, but nothing could be further from the truth. To understand the entire concept and simplicity, digital transformation starts from changing the way you simply think about your business today. I see no reason why small business or even enterprises should be against this idea as business in the “modern world” are all supposed to jump at the opportunity to improve and transform their business, especially when the rewards to are so high, and in-action can set you back so far.

The idea of “digital transformation” really centres on investing in new, innovative business models based on the current and emerging technologies – Does that sound complicated?

Digital transformation goes beyond just technology, it has a real human dimension which makes it even more important to start adopting the change. It goes without saying that the customer has more control today then ever before and the need to develop new capabilities required to serve them not just better and faster but with new personalised and immediate offerings.

Now let me use an example – I was told this story during the Superbowl by a good friend of mine. 

McDonald’s.

Most of you would laugh when I say the name McDonald’s mid discussion of “digital transformation” post but they are the perfect example.

In 2015 McDonald’s incorporated digital transformation in their restaurant experience and company processes. They started the installation of self serve kiosks, with this customers could quickly customize their hamburgers, they also adopted the Apple mobile pay.

Why? 

McDonald’s had a vision, the adapted new technology and  later that year in the 2015 Super Bowl football championship, using social media, they could gave away products related to the commercials they were airing throughout the game.

McDonald’s needed to respond to their customers and also monitor their social media trends in real time – this is where digital technologies came in.

Reconfiguration of their entire internal communication and operational processes was done and McDonald’s created a digital newsroom made up of a cross-functional team with members of the marketing and legal divisions, advertising and the social media technology provider of the company.

The success achieved was massive resulting over 1.2 million retweets including high-profile celebrities.

Digital transformation isn’t always process or technology hardware, it can be as simple as finding news ways to create value which in turn increases the opportunities of boosting the number of prospective customers in the digital space. It simply offers a seamless user experience to prospects thereby sustains a long-lasting relationship with its customers by developing an emotional connection.

It is not something to be left for the future as a good number of businesses have already begun their digital transformation, and personally, I would prefer addressing these changes before my competitors do. How about you?

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How do you upgrade and save money if you’re in a contract?

“Sorry, we are in a contract”.

These are the words I would say 5 times a day when sales reps knock on my door. On my busy days, it was more of a “shove off, I’m busy” line, but I honestly believed that being in a contract meant I was fixed to it for the agreed term. How wrong I was.

When you think about it, how is it that your current Photocopier supplier 9 times out of 10, will come in with usually 1-2 years remaining on your contract and offer you a “great deal” to “upgrade you” with no penalty? Let’s have a look.

To clear the misconception that being in a contract means you can’t go anywhere else, Photocopier contracts are broken down in two parts;

1. Lease agreement / Rental Agreements
2. Service agreement

If you ever decide to upgrade your machine before the end term of your Lease Contract/Rental Contract, the remaining term of that agreement x the lease/Rental amount is almost always added to the cost of the new equipment. Unless agreed otherwise. It does not matter if you resign with your existing supplier or a new one, they will both be required to pay this “payout” before the existing agreement can be canceled. Refinancing it with the new technology saves you from having to pay any fees out of your pocket and you can take advantage of potential savings straight away.

The second part is the Service Agreement. These agreements can vary depending on your supplier. Most service agreements are just that, an “agreement”, you are not contracted to a fixed term, the agreement simply agrees that they will guarantee service on your machine at “x” cost for the “agreed” term.

While most Service Contracts are really “agreements”, there are suppliers who will contract you to a minimum amount of pages per month. If this is the case, you will also need to pay the contracted pages per month x the months remaining. If you have one of these agreements they can be confusing. If you let us know, we might be able to offer you some advice to save you money while you finish that agreement.

So, how do I save money if I refinance the existing contract into the new one?

The answer is simple. The cost of equipment over the past 5 years has decreased, interest rates are at an all-time low and then there is the service rates. Service rates 5 years ago were 1.2c mono and 12c colour. We now see that the cost per page has dropped to around the 6-7c mark.

If you do the sums on your own current volume x the market cost per page rate, 9 times out of 10 you can save money on that alone!

Example:

Your Current Monthly Average Volume:

Black & White = 5,000 pages per month @ 1c = $50

Colour = 5,000 pages per month @ 10c = $500

Total Service Costs = $550

Your Current Average Volume At Market Rates:

Black & White = 5,000 pages per month @ .6c = $30

Colour = 5,000 pages per month @ 6c = $300

Total Service Costs = $330

TOTAL SAVING ON SERVICE ALONE = $220

*(These volumes are used as an example, insert your own volumes to calculate your own potential savings).

So if you have completed at least half of your contracted term and want to upgrade and see if you can save money, contact us and we can help you find out if it’s worth your time.

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