A question that I’m frequently asked is whether it makes more sense to purchase a copier or lease a copier. The answer to this question is based on the specific circumstances and preferences of a given individual or company. The purpose of this article is to illuminate some of the distinctions between the two options and to raise some points of consideration for each individual to weigh. Let’s explore some of the relative benefits of both purchasing and leasing;
Benefits of Leasing Business Copiers
- No out of pocket expense; when leasing a copier there is generally no down payment or any form of out of pocket expense which helps to preserve a company’s cash flow. In almost all cases lease agreements require no down payment and not even a first payment in advance. A customer will simply agree to a stream of payments that will begin several weeks after the installation of the machine. Retaining the valuable commodity of cash on hand is the primary reason that nearly 75% of commercial business copiers are leased.
- No Depreciation Schedule; when leasing a copier there isn’t the need to monitor the depreciation cost over a 5 year period which makes the administrative aspect of tax planning more streamlined.
- Consistent operating expense: When leasing a copier there is the benefit of a consistent operating expense that remains the same over the entire lease term making for easy and accurate budget forecasts.
Benefits of Purchasing Business Copiers
- No monthly payment – When you purchase a copier one of the benefits is that you have one less monthly invoice to receive and there is no monthly payment to process.
- No Finance Charges or Interest: when purchasing a copier you don’t have to pay the additional finance charges that would be paid had you chosen to lease the copier.
- Tax Benefits; In many circumstances a company can write off the entire purchase cost of a business copier in the year that it was purchased without having to depreciate it over the 5-year depreciation schedule. *Please consult with your CPA or tax professional regarding the viability of this option for your specific company.
- Eliminate the cost of shipping the copier back to the lease company at the end of the lease: When you purchase equipment you eliminate the requirement to ship the copier back to the lease company at the end of the lease term. Many companies are unaware that at the end of the lease term they are responsible to pay for the shipment of the copier back to the lease company that routinely can cost $400.00 to $800.00 *Stay tuned for part 2 of this article series for Copier Leases – Beware of the Fine Print.
- Retain the value of the asset: when you purchase the copier you of course own it for as long as the equipment has useful value. When leasing a copier in most cases you are going to upgrade to a new copier at the end of the lease term. Not only don’t you retain the value of the copier but you actually have to pay to ship it back to the lease company.
- Flexibility to make changes: often I hear people state that they are considering leasing because they perceive that they have more flexibility to upgrade with technology when leasing compared with owning the equipment. The opposite is actually true. When you own a copier you have the flexibility to do whatever makes most sense for your circumstances at any given time. After all, you are the sole owner of the copier. For example, if a newer model becomes available that your company desires you would have the freedom to trade in your existing copier and use that trade in value to offset the costs of a new machine. When leasing a copier there is always a significant penalty for early buyout or early termination and making a change prior to the scheduled end of the lease term requires that the customer satisfy the buyout in order to upgrade to a different model.
- Extend the useful life of your copier; when purchasing a copier you have the freedom to continue to use the copier so long as it effectively serves a useful purpose. Often companies can use a copier for 7 or 8 years or more. Most copier leases are either 36 or 60 months and in the vast majority of cases companies are rolled from one lease to the next so that they are always paying the full cost + finance charges of a new copier every 36 to 60 months.
When exploring the dynamics of the Purchase vs. Lease questions the single biggest equation seems to be whether a company would benefit more from retaining ever important cash flow by choosing a zero out of pocket lease or would a company benefit more by purchasing the copier and avoiding the finance charges and the challenges of having one more monthly payment to administer each month. Neither leasing or purchasing is right or wrong and in this writer’s opinion there is nothing inherently good or bad about either decision but it always helps to weigh the merits of both to help make an informed decision. For more information on copier leasing stay tuned for upcoming articles on Copier Leasing Beware of the Fine Print and also Copier Leasing $1.00 Buyout vs. Fair Market Value Buyout.
