Some businesses are in copier leases that they can’t seem to get out of. Following are a few examples of this and hopefully you will avoid this in the future. I will identify the three most common ones and then offer a solution at the end of this blog.
The first type of lease is where the dealer owns the purchase option at the end of the lease not you. This is commonly called a ‘dealer pass thru’. Unfortunately, it’s difficult for you to know if you’re getting into one of these because sometimes not even the sales rep knows; only upper management and the owner. The bottom line is that at the end of the lease your purchase option may be based on the “weather report” rather than the copier’s true value. It’s up to the dealer, not the leasing company. A ridiculous purchase option may be quoted to keep out the competition and lock you in for continued business.
The second type of trap is a CPC or cost per copy lease. You are told that you just pay for copies but in reality it is a lease in disguise even if the copier dealer calls it a rental. Notice that the paperwork includes a monthly or quarterly minimum. This determines the funding amount from the leasing company to the dealer. So why is this bad? It’s similar to what I discussed previously where the dealer owns the asset and determines terms at the end of the lease. Again, it’s unlikely that you can determine this ahead of time because the sales rep may not know either.
The sweet spot for the copier dealer is when you change your monthly or quarterly minimums during the lease. Often, this begins a new five year lease and you are locked in for a longer period. This is usually not mentioned by the sales rep who usually just shows you where to sign. This is similar to a cell phone contract where every time you make a change a new two year contract begins with penalties if you try to get out early.
In fact, even on a traditional lease that’s not CPC beware of making changes during the lease because when you are asked to sign something you are usually extending the life of the lease. Is this bad? No, as long as things are going well but it does lock out the competition in case you ever want to shop around for a better deal or newer technology.
Now, here’s the solution: just do leases/rentals with a $1 purchase option. That’s it! What that does is protect you. You can either keep it at the end or return it. You won’t have to deal with purchase options based on the weather report.