When the time comes to purchase a photocopier, scanner any piece of office technology, you will want to understand the advantages and disadvantages of taking on a finance option. In the Office equipment industry, 9 times out of 10 you WILL be presented with finance options, it’s the standard for how most office machines are placed into business all over the world. When comparing whether to rent or lease a copier vs buy a copier, there are several considerations which may direct you in one direction or another. So let’s take you through some key point between them.
WHO OWNS THE COPIER AT THE END?
Purchasing is simple, you have full ownership of the equipment with a capital outlay. Finance options however is one of the biggest miscommunications we see between customers and copier businesses. Almost every week while working in the copier industry, clients would tell me they thought they had ownership of their machine after their contracted finance term, however, technically, in a rental, the copier is still owned by the dealer or finance company that issued the rental contract. A lot of times the company that offers you the copier holds an agreement with the finance company which allows them to retain ownership of the device after you finalise the payment term but will then continue to bill you your monthly rental until such time as you upgrade the device. Think of it like your phone plan, after your contracted period, your phone supplier still charges you the monthly plan for as long as you stay. In either case, you do not own the copier in a rental situation. There is however an option to “lease” a device in which the payments are structured monthly, much like a rental agreement, but a lease will then have a residual amount payable at the contract end (usually a minimum of 10% of the total cost of the equipment), which is structured into the plan so that you can then take ownership of the machine at the end of the lease term. What’s really important here, however, isn’t who owns the copier for the sake of ownership itself, it’s the tax implications of the fixed asset. See more on that in our next point.
There is a clear advantage to renting and leasing when it comes to depreciating the asset of a large machine. With a rental or lease, the entire copier payment is deductible immediately and, since you don’t actually own the device, it is not a depreciating asset. When you purchase a copier, printer, MFP or scanner, you have to capitalize the equipment as an asset and then depreciate them slowly over time according to the proper depreciation schedule.
ASSETS VS LIABILITIES
Under a typical rental scenario, there is no need to record future payments as liabilities, meaning that your business doesn’t incur the additional liability of a very expensive machine(s). That will typically free up more available credit for use in expanding or maintaining your business.
FOREFRONT OF TECHNOLOGY
Upgrades. At the end of a rental agreement you typically have the opportunity to roll the agreement into a one and receive new equipment. This can result in faster print or copy speeds, greater capabilities, or simply the opportunity for you to upgrade and better match your growing business needs. When multiple machines are involved, it’s often a great strategy to stagger the lease agreements so that you are almost constantly upgrading a machine every year. In this way, many businesses have ensured they have a more frequent opportunity to upgrade or bolster the capabilities of their workflow. With the lowering cost of office equipment and finance rates respectively, you will often find that your copier rep will present you with the option to upgrade your equipment before the finance term ends. This certainly adds to the significant advantages of renting or leasing a device.
It’s also important to know that if you purchase a device, the speed and specifications of the equipment are dictated upon the capital you have to invest. With both Lease and rental having monthly repayments, it’s much easier to afford a faster or higher spec machine which can allow your business much more efficiency and productivity. Again, an advantage of financing equipment.
WHAT CHOICE IS BEST FOR MY BUSINESS?
Yes, there are big advantages to finance equipment but every business is different. A quick discussion with your Accountant will quickly help you make a more business specific decision on how to best purchase your business equipment.