Should you lease or buy your office copier / Printer or other equipment?
Should you lease or buy your Office Copier / Printer or other Equipment?
By comparing these amounts, you can determine which is the better value for you.
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Purchase price: Total purchase price.
Down payment: Amount paid as a down payment, which for leases is often called a capital reduction.
GST + PST or HST (%)Tax percentage rate charged on this purchase in your province. GST + PST or HST is included in each lease payment. GST + PST or HST for buying is charged on the total sale amount.
Investment rate of return: Rate of return on investments. This is the return that you would make if you were to invest your down payment or security deposit instead of using it in your equipment purchase or lease.
When it comes time to lease a larger Multifunction office copier, scanner or other multifunction device for your business…or perhaps even two or three, you want to understand the advantages and disadvantages of a lease. And you WILL be presented with lease options. It’s the gold standard for how these machines are chiefly placed into business all over the world. When comparing whether to lease a copier vs. buy a copier, there are several considerations which may steer you in one direction or another. We’ll go through some key decision points and then summarize in a table below.
Loan term in months: Term in months for your equipment loan. Typically this is 36, 48, 60 or 72 months. If your loan term is longer than your lease term, we compare the buy vs lease options to the time the lease expires, and then use your remaining loan term to calculator you outstanding loan balance.
Loan interest rate: Annual interest rate for your loan.
Other fees: Any fee, other than a capital reduction or down payment, required to be paid at the time of purchase. This may include license, title transfer fees, etc.
Annual depreciation: The rate of depreciation gauges how fast your new equipment will lose its market value. A high depreciation rate is about 20% per year, medium is 15% per year and low is 10% per year.
Market value of equipment: Value of your equipment after the lease term is over.
Net cost of buying: This is the total cost of buying your equipment. This is calculated as:
- + Total up Front Costs (down payment + other fees)
- + Lost interest
- + Outstanding loan balance at time lease expires
- - Market value of equipment at time lease expires
- = Net cost of buying
The lost interest on your purchase includes any interest you would have earned at your investment rate of return on the buy option's down payment and other fees. If the monthly payment for leasing is less than the monthly payment for buying, this also includes any lost interest due to the higher monthly payments. If leasing is more expensive than buying, your interest costs for buying are reduced by the amount of interest you would earn on the difference.
Lease term in months: Term in months for your equipment lease.
Lease interest rate: Annual interest rate for your lease.
Other fees: Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease. This may include license, title transfer fees, etc.
Residual percent: For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.
Security deposit: Refundable security deposit required at time of lease. We assume that the security deposit is fully refunded at the time the lease ends.
Net cost of lease: This is the total cost of leasing your equipment. This is calculated as:
- + Total up Front Costs (capital reduction + other fees)
- + Total Lease Payments
- + Lost Interest on Lease
- = Net cost of lease
The lost interest on your lease includes any interest you would have earned at your investment rate of return on the lease option's down payment, security deposit and other fees. Please see the definition for 'N
Staying ahead of the Curve
We alluded to the big advantages of getting a bigger Copier / Printer in a lease to own than you may have been able to afford, but there is one more angle on leasing that helps your business grow: Upgrades. At the end of a lease agreement you typically have the opportunity to roll the lease payments into a new modern device that 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.
And if like charts, here is one that outlines the basics fleshed out above:
|Who Owns the Multifunction Copier / Printer?||Leasing company until paid in full||Your company|
|Depreciating Asset/Deductible||Deductible expense (lease)||Depreciating asset|
|Assets or Liability||Not a capital expenditure||Reduces cash flow/available credit|
|Productivity||Bigger/faster machine possible||Machine size capped by capital|
|Maintenance||Virtually automatic as part of ongoing program||Separate contract|
|Future proofing and Upgrades||Regular pattern of upgrades||Longer term use of existing machines|
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- Admin Geek