Do you understand the terms of your Copier Lease?
Over the next few weeks we will begin to breakdown the typical copier lease and attempt to educate you as to what exactly the different components mean, and some of the pitfalls to look out for when signing one of these documents.
When the salesman came in to sign ALL of the paperwork, I even read everything over. Well, maybe not every word, but I did check the important parts! I think? But we did have a nice conversation about our kids and how well they are doing. Oh boy, what the heck did I just do? I’m not certain I even understand the lease terms I just signed.
Sound familiar? We hear this all of the time!
Let’s take a look at a copier lease section-by-section and attempt to clear up some of the mysteries for you. Not all leases are exactly the same and it would be impossible to give an example of each companies lease documents, so let’s talk in general terms and show some basic examples.
Usually the first item on any lease is your company name, address and telephone number, along with the equipment make/model and serial number you’ll be leasing. We’ll assume you know this information and there is no need to formally discuss these? It’s kind of like getting 200 points on your SAT’s for knowing your name.
We are going to start with this section, which is typically near the very top of the lease:
Section A (Base Term in Months): OK, so this one sounds easy enough, it is simply the TOTAL amount of months you’ll need the equipment. It still amazes me how many times I visit a perspective customer and they tell me they are not sure how long their lease is. Really? Oh and here’s another cute salesman trick: Put 36 months on the sales order and 63 months on the lease! Can you guess how many months you’ll be paying? Please check your numbers CAREFULLY.
Section B (Total number of Lease Payments): Again not rocket science, but let’s make sure that the number in A equals the total number in B. An important point about this section and why you will sometimes notice two separate lines, there are in fact leases that will start out with X number of payments at one price and Y number of payments at another price. If you have agreed to a price for the entire term, make sure this section DOES NOT contain more than one price.
Section C (End of lease purchase option): By entering into a lease, you understand that you do not in fact own anything at the end. The asset must be either returned or purchased at the end of the term. This section will define what those terms will be.
- Fair Market Value (FMV) is basically determined at the end of the term and is derived from the leasing company’s perceived value at the conclusion of the lease
- 10% (or some percentage) is exactly that. A fixed percentage of the total value at the end of the term.
Easy math would be PAYMENT x NUMBER OF MONTHS x PERCENTAGE = FINAL PAYMENT
- $1.00 Purchase Option means that you get to take title of the machine for $1.00 at the lease conclusion. This is the closest option to actually taking a loan.
BEFORE you sign the lease make certain one of these boxes are checked and it’s the one you initially negotiated.
Section D (Upfront Costs/Fees): This is the section to advise you of any monies due upfront or in addition to the payment itself.
- Advance Payment(s) – an example of this would be putting down first/last payments to reduce the monthly payments
- Security Deposit – is pretty much self-described. I will say, most copier leasing companies no longer require a security deposit.
- Documentation/Filing Fees – yes, every lease generally has some sort of fee associated with its inception. Contrary to popular belief, the vendor DOES NOT get compensated on these!
This concludes PART 1 of Understanding your copier lease and in the coming weeks we will take you through the entire document in hopes of making you a better consumer and educated on exactly what you are signing.
See you soon…