For many businesses, leasing a new copier (or fleet of copiers) can make more sense than buying a new copier outright. You may need a high-end machine with advanced features that’s beyond your budget. Or perhaps your business needs are evolving, and you’re not willing to invest in expensive equipment when your needs might change in the near future. In these cases, a copier lease can be an effective and affordable way to acquire the functionality you need without the risk. That said, a copier lease agreement is a binding legal document that can contain surprises if you’re not careful.

How Does a Copier Lease Work?

In essence, a copier lease means that instead of buying a copier, you’re leasing a copier for a defined period. You get the full use of the copier for the duration of the term, and the machine remains the property of the lessor throughout.

A copier lease typically comes bundled with a maintenance and service agreement that covers some (or all) of the maintenance, repairs, replacement parts, and consumables like paper and ink, or toner that may be required during the copier lease term. At the end of the lease term, you’ll usually be offered several options, which we cover below.

Key Considerations in a Copier Lease Agreement

Let’s take a look at some of the key provisions in a copier lease agreement and some of the red flags to look out for.

Lease Type

There are two basic types of copier lease agreements – the operating lease and the capital lease.

The operating lease, also known as the Fair Market Value Buyout lease, is the most common form of copier lease and generally attracts a lower monthly fee than a capital lease. At the end of the lease term, you have the option to buy the machine for its fair market value.

With a capital lease, also known as the $1 buy-out option lease, the lease is treated more like a loan. The lease typically costs more than an operating lease and can have a longer term. However, the copier appears as an asset on your balance sheet, meaning you can claim depreciation as a tax-deductible expense in addition to deducting the leasing fees from your taxable income. At the end of the term, you have the option to buy out the copier for $1.

For most businesses, the lower monthly fees associated with the operating lease generally make this the more attractive option.

Lease Duration

Copier lease durations typically run from 36 to 60 months, depending on factors like the model, provider, and type of lease. Longer-term copier lease agreements usually incur a lower monthly fee than shorter-duration leases. However, the total cost over the whole lease period is likely to be significantly higher in the long run with a longer lease term.

Initiation Fee

Some copier lease agreements include a lease initiation fee, which is a one-time fee billed on the first monthly lease statement. This fee is usually affordable (in the $70 – $130 price range). However, it can come as a shock to find this charge on your bill if you’re not expecting it.

Lease Termination Notification

Most copier lease agreements aren’t structured for automatic termination of the lease at the end of the lease term. You’re generally required to give notification that you intend to terminate the lease, otherwise the lease will auto-extend for an additional period of one to 12 months, with monthly payments being required throughout that period.

These commitments are usually non-negotiable and difficult to waive. So it’s definitely worth taking note of the notification period (generally around 90 days before the end of the lease) and submitting termination requests timeously to avoid unnecessary and avoidable expenses.

End of Term Options

At the end of the copier lease term, you generally have the following four options:

  1. Purchase – As discussed above, on a capital lease, you’ll have to buy the machine for $1, while on an operating lease, you can buy it at fair market value, which can be negotiated.
  2. Return – Provided that you’ve given timely notification of your intent to terminate and return, and you cover the shipping costs (discussed below), you can return the machine and end the lease.
  3. Upgrade – You’ll typically be offered the opportunity to upgrade to a new machine on a new lease.
  4. Renew – If you don’t take up any of the above options, your lease will generally auto-renew. More on that below.

Generally speaking, the more of these options available on your copier lease agreement, the better.

Performance and Service Expectations

It’s very important that you’re sure the machine you’re leasing can deliver the performance you require, and that your lease agreement includes the specific services you need.

It’s not easy to terminate a lease agreement on the basis of subpar performance or service. That’s because most copier lease agreements are arranged by your provider through third-party credit institutions, who are not responsible for performance. So, make sure you choose a reputable partner and brand of copier to avoid performance and service issues.

Upgradability

It’s quite common for businesses to want to upgrade their machine(s) during the course of a copier lease agreement. If you want to terminate a copier lease early, you’ll have to pay all the remaining installments. Plus, in the case of an operating lease, you’ll have to buy the machine at fair market value as well.

However, if you want to upgrade your machine during the lease term, most copier lease providers will facilitate a “trade-up” for you. This generally involves signing a brand new lease and starting again from month one, but at least you won’t be stuck paying for a machine that is no longer meeting your needs.

Insurance

Insurance is an essential component of a copier lease agreement, and you generally have two options.

The more cost-effective option is to add the equipment to your existing general liability insurance policy, with you as the sole-loss payee for the value of the machine. If you don’t have your own insurance or don’t specify to your provider that you will be adding the machine to your insurance, you’ll be hit with an insurance surcharge of 6-8% added to your monthly fee. That’s generally significantly more expensive than self-insurance.

Copier Return Obligations

In most copier lease agreements, the costs of shipping the copier back to the supplier at the end of the lease are your responsibility. That can be expensive if you need to ship the machine to a different city or state, given how heavy copiers typically are.

Suppliers usually have a list of preferred shipping companies that tend to charge premium rates. However, in most cases, the supplier will accept you using your own shipping company, provided, of course, that the machine arrives in good order.

Finding a Reliable Provider

Saving on end-of-term shipping costs is one great reason to find an excellent copier lease provider in your own neck of the woods. If you’re in St. Louis, Missouri, Columbia, Missouri, or western Illinois, Da-com is a full-service IT and office equipment supplier offering copier lease, managed print services, and a wide range of products and services to meet your every business IT need. Contact us today for a free quote.