When it comes to equipping your office with the necessary hardware, the copier machine is often a central piece of equipment for daily operations, handling everything from printing and scanning to faxing and copying. Yet, when you’re faced with the decision to acquire a new machine, you may find yourself pondering whether to buy, lease, or rent your next copier. This choice can have significant implications for your business’s cash flow, tax obligations, and overall financial health. In this article, we’ll explore each acquisition strategy to see which might be the best fit for your office needs.
Buying a Copier
Many businesses seek to grow their assets and equity over time. As such, they’ll seek to purchase the equipment necessary to keep their organization up and running. The theory here is that if you buy durable equipment and take care of it from the beginning, it’s likely to take care of you at a lower overall cost over time. You’ll often find business owners and managers in industries that experience boom and bust cycles seek to avoid monthly expenses to minimize the impact of a bad economy. They’re likely interested in buying a copier while the company is doing well, so that it’s easier to minimize expenses if the economy experiences a downturn.
Advantages of Buying a Copier
- Ownership: When you buy a copier, it becomes an asset to your company. You have the freedom to use it as needed without worrying about the terms of a lease or rental agreement. And the book value of the MFP is likely going to affect the value of a company if it is ever sold.
- Cost-Effective in the Long Term: If you plan to keep the copier for an extended period and it doesn’t become obsolete, purchasing can be more cost-effective. You aren’t constantly paying the acquisition cost for a copier like if you were leasing.
- No Interest Expense: Leases are essentially financing vehicles, and you’re paying for the privilege of using the leasing company’s money over the time of your lease agreement.
- Tax Benefits: Purchasers can deduct the machine’s depreciation from their taxable income over the asset’s useful life (usually 5 years for office equipment). Sometimes accelerated depreciation is available while computing your federal taxes, essentially allowing you to write off the entire cost of a copier right away.
- Flexibility: You can sell the copier at any time or decide to upgrade whenever you find it necessary.
Disadvantages of Buying a Copier
- Upfront Costs: The initial investment is substantially higher when buying a copier outright, which could be a burden on your cash flow, especially for small businesses.
- Maintenance and Repairs: Often, the responsibility for maintenance and repairs falls on you as the owner, which can result in unexpected costs. Some copier dealers are more than happy to write a service agreement for your purchased copier, though.
- Higher Usage Costs over Time: As copiers accumulate more wear and tear, they are more likely to need additional servicing to keep them going. Expect your service agreement costs to rise over time to accommodate the additional attention your machine will require as it ages. There will come a point in time when the cost of printing might make it cheaper to move on to a newer, more reliable, MFP.
Leasing a Copier
Unlike the “buy and hold” types of business managers, the overwhelming amount of copier buyers want to lease their copiers for a myriad of reasons. Generally they want to spread their payment over the life of the managed print fleet. And it’s not unusual for us to put together a printing solution that saves more money than the organization spends every month on their old copiers. It’s almost as if we’re paying them to leave their old copier dealer behind.
When to Lease a Copier
- Conserving Cash Flow: Leasing often requires no down payment, and payments are spread over the lease term. If you want to minimize the cash leaving your bank account, a copier lease is for you.
- Maximizing Tax Deductions: Lease payments can generally be deducted as business expenses in the year they are paid. This can lower your tax liability right away.
- Maintenance Included: Many lease agreements include service and maintenance, ensuring your copier is always in working order without additional charges.
- Improved Fleet Management: Newer copiers are more reliable and less expensive to operate. Employees are more efficient when they only need to learn how to use one interface across an entire fleet of copiers. So changing all your copiers at one time often makes a lot of sense.
- Lowest Cost per Print: Copier manufacturers are always working to improve the quality of their machines. Improved durability of parts has extended lifecycles and advancements in toner has increased yield. And newer machines experience fewer breakdowns. If your organization prints enough, the savings you can generate on new equipment can often offset the cost of keeping old copiers that you own.
- Technology Upgrades: Copiers are a highly competitive market, and machines are introducing new features and efficiency with every new generation released. Just 15 years ago, we were beginning to see the advantages of scanning documents directly into line of business software (Many traditional copier dealers still haven’t figured this part out, but I digress). Then we got print from mobile devices and intelligent print routing. Today we’re scanning to the magical cloud and really starting to take MFP security seriously. At the end of the lease term, you have the ability to upgrade to newer technology rather than being stuck with outdated equipment.
Why You Might Not Want to Lease a Copier
- Higher Acquisition Cost: Leasing can be more expensive than buying in the long run, especially with longer lease agreements. Figure you’re signing up for acquisition costs that never end as long as you’re doing leases.
- Locked-In Contracts: Lease agreements lock you in for a set term, making it challenging to terminate the lease early without incurring penalties. The leasing companies are generally helpful when you’re upgrading and establishing a new lease with them. But if you’re switching to a competitor, expect to be on the hook for the balance of payments due.
- No Equity: You do not own the copier, and hence you are not building any equity, even though you are responsible for monthly payments.
- Requires Suitable Business Credit: Leasing companies don’t want to write your paper if your business has less than two years of positively reported payment history. Some might accept a Personal Guarantee from the small business owner. In these situations, you’re basically looking at Tier B and Tier C financing, and those could look like credit card interest rates. You’re probably better off renting a used copier here.
Renting a Copier
You don’t see much talk about renting a copier in the market. But it can be the best option for acquiring a copier in many circumstances. In these arrangements, the copier dealer generally provides a used but well maintained MFP. They’ll do the installation, service, and removal after the rental agreement ends. You’ll generally pay a couple months of rental in advance to protect the dealer from non-payment risk, and the dealer agrees to keep your machine up and running and supplied with consumables.
Reasons to Rent a Copier
- Flexibility: Renting is typically on a month-to-month basis, providing the most flexibility to change or cancel your plan without long-term commitments. If you have seasonal business needs or want to do a “trial expansion” into a new market, a rental copier can help you operate more efficiently.
- All-Inclusive: Like leasing, renting usually includes maintenance and repairs, saving you from unexpected costs. Just keep sending payments as long as the copier fits your needs. When circumstances change, let your copier dealer know and they’ll work with you to take the rented copier back.
- Ideal for Short-Term Needs: Renting is perfect for businesses with temporary needs, such as events or short-term projects. It’s not uncommon for a professional organization to rent a copier during their convention. Or you could do a rental copier while you’re building up that positive payment history for your new business so that you can do a more cost effective lease.
Why you Might Not Want to Rent a Copier
- Higher Monthly Costs: Because rental agreements are short-term and flexible, the acquisition cost can be higher than leasing or buying.
- No Equity in Ownership: Unlike purchasing, there are no depreciation deductions available when you rent. You can write off the rental like you would a lease, though.
- Not Cost-Effective for Long-Term Use: Long-term rental can be financially imprudent compared to buying or leasing the same equipment.
In summation, the decision to buy, lease, or rent a copier should be based on an analysis of your company’s financial situation, tax considerations, and operational needs. If preserving cash flow and staying up-to-date with the latest tech is vital for you, leasing or renting could be advantageous. On the flip side, if long-term cost savings are paramount and you can handle the upfront investment, buying might be the way to go. And if you’re operating a newly established business, a copier rental is probably what you want to do.
Always consult with a financial expert or an accountant to understand the detailed tax implications before making a final decision. Each option presents unique benefits and drawbacks, and finding the right fit is crucial for the sustained success and operational efficiency of your business.