We have chatted with some folks over the past couple of months who have copier leases that are way too expensive normally, and doubly so during a pandemic. What can you do if you have a copier lease that is $600 or $800 or $1400 a month like one that we saw?
First, before we go into the specifics, and this in not legal advice, it is merely industry information, let’s talk about what happens when you decide to lease a copier.
First, the dealer sets the price of the copier. For ease of numbers, let’s say the copier is a $10,000 copier – in the high middle of the road range. Once the dealer has this number, you will see a payment around $200 for 60 months or $300 for 36 months.
The client, you in this case, signs a document. The copier company orders from the manufacturer or distributor the copier you wanted. Let’s say their cost is $9000 on the deal leaving them $1000 in profit. So they order the copier and install the copier. You sign you got what you expected. The copier dealer pays the manufacturer and the the bank (leasing company) pays the dealership the $10,000.
So you are 9 months into your contract and coronavirus hits. You call your dealer because you realize you can’t afford the copier. Now you are expecting the dealer to take the copier and let you off the hook. But they can’t because if they do… they only made $1000 and the buyout at this timeframe will still be about $10,000 (the bank makes money to finance the copier) – so if they do this, they would lose $10,000.
Now that doesn’t work, so you try the bank and find they are as reluctant. Why? At $200 per month for 60 months – they stood to make $2000 over 5 years to finance the deal. So for them, it doesn’t make sense to be lenient because … remember, they paid the dealer the full amount of the copier when you got it.
So – if you get stuck with it you lose $8000. If the copier company takes it back, they lose $10,000 and if the bank says no worries, they lose $9000. Copier leases going bad isn’t good for anyone. This is the rub you are sensing when you call your dealer and the bank.
OK, So What Then?
If it was me, the ideal solution is finding someone who is willing to take over your lease and rather than have $8000 lost, maybe you lose $3000. In order for this to work, both the copier company and the leasing company would have to be OK with it. The copier company if they are doing a supplies and service plan (unless that can be cancelled without penalty) and the bank because they are the ones holding the note on the equipment.
It is hard, no matter how you slice it, and someone always loses big when a lease isn’t completed. So if you can, it is best to complete it.
It also shows the importance of getting the right lease in the first place. This example is something most companies can survive. But what if it is a $30,000 copier (at $600 per month) or a $50,000 copier ($1,000 a month)? This is when it gets exceptionally brutal.
A good conversation and understanding where the players all lose is good when you are trying to make a plan because then you can understand what to offer and what to try as you work with your suppliers rather than against them.
If you need help with a low cost copier lease or to go over your situation, let us know, we are here to help!