New digital printing technologies with the potential to enhance organisations & reduce operating costs are constantly emerging.
These are now being made affordable to small & medium organisations through lease agreements, free printing technology schemes & subscription services.
As with most opportunities, there are some excellent agreements available from suppliers that will be a good match to an organisations needs – as well as others that should be avoided at all costs.
The complexity of leasing arrangements has led to difficulties for organisations in the past, with a small number of cases causing significant unplanned costs.
So, while leasing and subscription service agreements may in many cases be a sensible option, it is always prudent to carefully consider the pros and cons of each individual agreement.
This document has been prepared to help organisations select a cost-effective solution and also highlights some of the common pitfalls.
Leasing, free equipment placement & subscription services
Leasing office printing equipment
Leasing agreements can be a great way to secure office printing equipment, needed to provide professional documents to your clients & efficient workflow solutions for your team.
It can also free up much needed capital for use in other areas of the operation & save you from having to use valuable funds to buy expensive equipment outright.
There are numerous advantages when leasing equipment…
- You don’t have to pay the full cost of the equipment upfront. Freeing up cashflow
- Leasing may allow you to buy better equipment than you can afford
- Monthly or quarterly lease costs are fixed, making it easier to forecast cashflow
- The lease will be over a fixed term, allowing you to budget accordingly
- Leasing can reduce your tax bill, as the cost is deductible as a business expense
However, there are also some disadvantages of leasing equipment too…
- It will work out more expensive than buying the equipment out of capital
- Lease agreements are for a minimum period & there will be early termination fees
- Some agreements require you to give notice of termination or they continue for longer
- When you lease an asset, you don’t own it. The leasing company do.
- It might cost you extra cash to get title to the equipment at the end of the lease.
Some other considerations to think about…
- What happens at the end of the lease?
- What happens if you want to keep the equipment beyond the lease term?
- Can you settle the lease early?
- Is the supplier & lease company respectable with a proven track record?
Another thing to be clear about when leasing office printing equipment. It won’t include the costs of service (consumables & maintenance). Service is provided by your nominated supplier, under a separate service agreement & charged in a monthly fee or a set fee for each page you print/copy.
Choose your supplier well, as they’ve been numerous horror stories surrounding service agreements. Things like unagreed price increases, hidden extra charges, excessive termination fees, fresh air leasing, unagreed agreement extensions & extortionate hourly rate fees. Click for details.
If you’re not bothered about having the latest new printing equipment. This could be a great option. There are office equipment suppliers who specialise in refurbished equipment & some will even provide & install them for free saving you £1,000’s. Asking in return a commitment for the service.
This is an area where you need to be careful. There are some unscrupulous suppliers who’ll want to tie you in for years & will then hit you with loads of hidden extra charges as previously detailed.
There are also honest suppliers. Who’ll provide a fantastic service for a fair price. Using short-term agreements with simple terms. Even guaranteeing their prices giving you certainty & peace of mind.
What’s the advantages…?
- No financial lease agreement. Meaning no monthly or quarterly fees for equipment
- Free equipment. Meaning no capital outlay. Saving £1,000’s
- Free installation. Saving you £100’s
- All equipment is fully refurbished. Meaning it will work as new
What’s the downsides…?
- It won’t be the latest new equipment
Some other considerations to think about…
- Is the supplier respectable with a proven track record?
Equipment can also be provided by way of a subscription-type service that includes the equipment, consumables, support, maintenance and training. Wrapped up into 1 monthly fee (usually fixed).
Whilst some of these arrangements may make sense, it is always important that the overall value for money of the service is assessed and that you don’t commit to complex & unclear agreements.
What’s the advantages…?
- No cash outlay for the equipment
- No long-term financial lease agreement
- Fit for purpose equipment provided
- Certainty of cost with 1 fixed monthly fee covering everything
- Certainty of service with support & maintenance included
- As your needs change, you can swap onto a different plan
- Print as much as you like without worrying about the price
What’s could be a downside…
- Might not be new equipment
Some considerations might include…
- Does the agreement represent good value?
- Is the equipment being provided fit for purpose?
- Is the monthly fee guaranteed never to increase?
- Is the agreement clear that it includes consumables, support & maintenance?
- Is there any tie in period?
- How long is the notice period?
- Are there any termination charges?
- Will the equipment be replaced if it breaks or needs updating?
- Can I change printing plans without charges?
- Is the supplier a respectable company with a proven track record?
Know your supplier & their lease company
Although some equipment suppliers may supply some printing equipment free or as part of a monthly subscription service.
Things like new photocopiers or high end digital multi-function devices will be purchased via third party finance companies (unless you pay cash for them) on a lease agreement.
When you’re dealing with a supplier you should always check their credentials. Check on their website for testimonials, case studies & customers videos. Even ask to talk to an existing client.
If you do need to use a finance company to lease the equipment. Make sure they are using a market leader & credible one, with a good track record & affordable rate.
What happens at the end of the lease?
In most instances. You will not own the equipment at the end of the lease. Before taking out a lease you should always check what options are available at the end of the lease period.
At the end of a lease you’ll generally be offered the opportunity to continue leasing the equipment at fair market rentals or return the equipment to the leasing company.
Depending on your supplier & the finance company they use. You may be able to take ownership of the equipment for a small or even zero fee. Just paying your supplier for ongoing service.
When leasing equipment check whether the maintenance contract is a separate agreement. If it is, check whether the length of the two agreements is the same and how much notice might be required to terminate each one.
Check what level of service you will get. Will there be regular maintenance visits, or will you need to alert the maintenance provider if a fault occurs. If a fault does occur, what response time is stated and is equipment replaced if it can’t be fixed.
Check there are any maintenance charges not included & whether there is the potential for extra charges, if there is, ensure that the basis for charging is fully understood. It is also a good idea to find out whether a similar level of service could be included from a different supplier.
Check that any necessary software upgrades are specified in the maintenance agreement. Some suppliers will charge to do these & their hourly rates can be excessive. So, make sure you have costed these into your decision.
Some suppliers may charge extra for the provision of supplies. Make sure they are included in the maintenance/service agreement. If not, they need to be costed & included in your decision making.
Check that it is clear what supplies and/or consumables will be provided, in what time period and by whom. On some occasions it may be better value to buy supplies separately over time as and when they are required. This depends on your usage & needs as an organisation.
In you’ve purchased the equipment on a lease agreement. During the minimum lease period you may be approached by a supplier & asked whether you’d like to upgrade your existing equipment.
Keeping the equipment, you have and waiting until the end of the minimum lease period before upgrading will almost always be cheaper than upgrading before the end of the agreement.
If your needs do change, and you need to upgrade, you should always speak with your current finance company as they will be able to provide you with details of the available options.
You’ve got to be careful when thinking about upgrades during your minimum lease period. There’s been many cases of organisations paying 10’s of thousands for equipment worth just a few £1,000.
Should you choose to upgrade your equipment then you will normally be required to settle the remaining balance on your existing agreement or being given the option of adding outstanding balances on to the cost of the new equipment & included into the new lease payments.
Not only would this prove to be poor commercial practice, but the inclusion of the existing balance owed from the previous agreement in a new lease, would mean you are financing fresh air.
The sensible option is to settle any outstanding lease payments prior to upgrading or wait until the existing lease agreement ends.