$1 Out or FMV Lease?
When leasing a copier, the average rep will do a 5 year FMV lease for everyone. The question should be, is this right for EVERYONE? We don't believe every copier lease is perfectly suited for every person. Some people need a shorter lease, some need a longer lease. Rather than tell you what is best, we want to help you know what to choose with a handy little chart... 😉
Some of the above may seem confusing. We hope it is not. So, let us go over some of the leasing basics.
FMV – Fair Market Value – What this lease means is that the copier is leased to you for the term you sign up for and at the end of the lease, you are required to return it. This includes the fact you are responsible for the packaging and the freight costs for the copier. Your monthly payment will be lower because the bank gets the copier and can sell it in the open market.
$1 Out Lease – This is a lease that is essentially getting a capital equipment loan. After paying all your payments on the hardware, you are able to pay $1 and the copier is yours. You do not return and you can sell or continue using as you see fit.
Lease Upgrades – You will generally be offered to upgrade your copier with approx 6 months remaining on the contract. Here is why this is offered. Say you have a lease that costs $300 per month and a maintenance plan that is another $300 per month. If you get out of the lease with 6 months left and roll into a new lease, that is $3600 of contract liability left ($300 X 6 = $1800 for both the copier and maintenance – for $1800 X 2 =$3,600)
Now, no one likes a bad deal. Often companies seeking a new copier getting a lease return offer will solicit competitive bids. The problem with this is that the current supplier gets a HUGE cost advantage here (thus why they do this)… They can wrap the $1800 for the equipment into the next lease and can choose to “forgive” the last 6 months on your current agreement. Enter copier company B.
Copier company B, in order to compete has to wrap in the same equipment costs, plus they have to account for the service revenue of $1800 making it nearly impossible to compete. They start from an $1800 disadvantage. For the company getting the copier, it would actually be better not to take the offer as they are paying $1800 + interest more for the new copier than if they just waited the 6 months. It is nicer to get the sale than it is to protect a customer’s interest for many companies.