Leasing Office Equipment
Written by Author on August 30th, 2009Leasing Office Equipment versus Buying
A business needing a photocopier for nominal usage may only need a small desktop copiers, purchased at a fairly low cost. This could be more cost effective than a lease agreement. However, a business needing several high end photocopiers may consider a leasing agreement to avoid paying a large initial fee and reduce overall running costs.
Lease agreements typically last between 1 and 5 years and terminating a lease before it ends can be difficult. Leases can offer flexibility once a preferred lease term is agreed as it allows the business to renew for new technology at the end of the lease or even during agreements. The only extra cost of a lease agreement is the fully inclusive maintenance which covers all parts, toner and labor for the duration of the agreement. The total overall costs may well be reduced due to extremely low toner inclusive running costs, making leasing higher specification a very effective way of reducing total costs of expensive printing compared with in house or outsourced printing.
Choosing to take out a lease agreement can save a business a substantial amount of money and give peace of mind in today’s uncertain financial climate, as long as a credible and reliable supplier is used.
Leasing Office Equipmentst: Why It Makes No Sense
One of the most common sources of administrative cost abuse comes in the form of lease contracts for common office equipment.
1. Interest rates are considerably higher with leases, as opposed to bank borrowing.
2. Because lease rates are not controlled, and are often not clearly stated in a contract, there exists an opportunity for the sales representative to build in extra costs which affect the lease payment.
3. The funds for leased equipment often come from a capital lending company, which separately bumps up the payment amount (a tactic referred to as over funding) and then kicks back something to the equipment provider.
4. Lease contracts will frequently include separate additional charges of 3-8% for property insurance, which is normally covered automatically in a standard business property insurance policy. These charges can be eliminated by providing proof to the leasing company of such insurance coverage.
5. Lease contracts often require the customer to provide notice within 90 days (and up to 180 days) of their intentions to terminate the lease. If the customer fails to do so, the leasing company can renew the lease for another twelve months and the customer is stuck.
6. If the customer attempts to terminate a lease prematurely, they may be surprised to find that the rules will not provide for payout of the term of the lease unless the lessee commits to purchasing the equipment at 20-40% of original equipment cost.
7. As the typical bill for leased equipment does not clarify that the lessee has paid, for example, 48 of 60 months, customers continue to pay in response to delivered invoices as they are unaware that the lease term has expired.
8. Many lease contracts will stipulate that at the end of the lease term, it is the lessee’s obligation to ship the equipment to a destination of the lessor’s choice and be responsible for shipping costs and liability for the equipment until it is received and accepted.
9. Due to increasing levels of questionable business practices in leasing, a dollar- buyout lease is the best way to determine and control total cost of ownership.
10. The loyalty of leasing companies is to the vendor as opposed to the end user.
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