If you're reading this, you've probably been tasked with figuring out whether your company should purchase copiers and printers outright or lease them from a business equipment provider. Most research available online will hem and haw about how each option can be good for certain types of businesses, and then conveniently link to their own copier sales or copier leasing site.
This guide cuts through the advertising noise and lays out the facts, so you can decide what makes the most sense for your scenario.
Types of business equipment leases
There are two primary types of business equipment leases: operating leases and capital leases.
- Operating leases: Most businesses choose operating leases, also called fair market value leases, because they offer lower monthly payments than capital leases. When a business gets an operating lease for a copier or printer, they're essentially renting the piece of equipment, so the asset never gets added to the lessee's balance sheet. When the lease ends, the lessee has the option to buy the copier, but the buyout cost will be calculated by the lessor based on agreement terms, depreciation, wear and tear, new technology, and market demand. In general, operating leases make the most sense for businesses that don't want the hassle of owning a copier or printer, and want to continually lease recent models instead.
- Capital leases: Sometimes called $1 out purchase leases, capital leases are the less common choice for most businesses. When a business gets a capital lease for a piece of equipment, it's more like a loan on the money than a rental on the equipment, so the interest and principal being paid is going toward the cost of the copier, and the copier goes on the lessee's balance sheet. The monthly rate for a capital lease is higher, because 100 percent of the cost of the equipment is being financed. However, a capital lease does offer an advantage for lessees who plan on eventually buying, because the buyout cost is stipulated in the contract at the point of signing. In general, capital leases make the most sense for businesses that want to purchase and own a printer or copier, but don't want to make the entire purchase up front.
The benefits of leasing
- Avoid obsolescence: Leasing equipment is an easy way to avoid obsolescence, which is a major concern for some companies and a nonissue for others. Businesses that only require basic printers and copiers are usually less affected by obsolescence than those that rely on highly specialized printers with specific high-tech features.
- Low upfront costs: Leasing not only allows businesses to obtain printers with low upfront costs, it also helps preserve credit. Many small businesses have limited access to credit and want to avoid using it whenever possible; leasing equipment is one way to do that.
- No hassle: When a company leases printers, there is no resale or disposal hassle. Leasing is also convenient because most equipment providers offer maintenance plans, which can be included in the lease itself or paid for separately. Companies with limited IT staff often choose leasing for maintenance purposes alone.
The drawbacks of leasing
- More expensive: Leasing equipment wouldn't be a business if it wasn't profitable, and the reason it's profitable is because the lessee pays interest. At the end of a lease term, most lessees will have paid more than the actual value of the copier leased. Even in rent-to-own scenarios, such as with capital leases, the lessee/eventual purchaser usually ends up paying more than market value for the printer. In addition to paying more for the actual cost of the printer, many businesses overpay for maintenance plans. When a maintenance plan is included in the equipment lease, and not obtained separately, the lessee is paying interest on the copier and on the maintenance plan.
- Locked into a contract: For small businesses, especially startups, being locked into a printer lease can be a negative. As businesses change their printing needs evolve, and a printer that was leased when the company only had 10 employees may not be adequate for a 75-person workplace. Similarly, some small business owners overestimate what they need in a printer or copier and end up stuck with a lease for something unnecessarily expensive.
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The benefits of purchasing
- Less expensive: It is almost always less expensive to purchase a printer or copier than it is to lease one. Companies that want to minimize the amount of money they pay in interest for goods and services will usually opt for buying over leasing.
- Recoup investment: Even though a printer is a depreciating asset, a used printer can be sold if it's no longer needed, whereas a leased printer cannot.
- No contracts: When a company purchases a printer, they're not locked into a contract with a third-party provider.
- Flexible maintenance: A leased printer is the property of the lessor, which typically means the lessee is not contractually allowed to perform any type of maintenance. This puts the lessee at the mercy of the lessor when things break. When a company owns equipment outright, the manager or owner can immediately hire the tech of their choice to service company printers without hesitation or outside approval.
The drawbacks of purchasing
- Initial expense: The expense of purchasing a printer outright is too much for some small businesses to manage. Businesses that require highly specialized industrial printers and copiers often lease rather than buy, too, because such machines can cost thousands of dollars and are expensive to repair out of pocket.
- Replacement costs: When a purchased printer is outdated or no longer functioning properly, it's up to the company that owns it to replace it. This type of unexpected cost associated with wear and tear (as well as obsolescence) is undesirable to some business owners.
- Harder-to-maintain consistent standards: Companies that have multiple branches sometimes choose to lease equipment because it's easier to maintain the same standards across every location. When purchasing options aren't centralized, different branches can end up with wildly different expenses and levels of technology.
Tax implications of leasing and buying
There are tax implications for both buying and leasing printers. Printers are depreciating assets, which can be claimed on taxes, but many equipment leases can also be claimed. Both leased and owned printers fall under section 179 deduction when companies file taxes, so it's best to consult with your business's accountant before making a final decision on whether to buy or lease. [Read related article: How to Choose a Copy Machine for Your Business]