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Six Reasons Why Copiers Leases Can Cost You More Than You Signed For

 

When you signed your last copier lease, did you happen to take the time to read that lease?  How about the maintenance agreement?  If you're like most lessees, you probably skimmed over the verbiage on the lease and then signed the maintenance agreement without reading the T's & C's.

Not reading those T's & C's could lead to some problems in the future, because there are clauses in those agreements that will increase your costs.

1) Maintenance included with the lease:  Some leases have a clause that allows the lessor to raise your monthly payment for hardware and maintenance/supplies by 10% or more per year. 

2) Insurance with the lease:  Yes, you are required to have insurance on the leased equipment.  Most leasing companies will bill you for insurance which is added to the monthly payment.  This is an additional profit center for some leasing companies. 

3) Escalating Maintenance/Supply Agreement:  Almost all maintenance/supply agreements have a built in annual escalator clause.  In most cases there is a clause that states something like, "we may raise your rate annually".  All maintenance/supply agreements are raised annually, because as the systems get older, they are more costly to maintain.  However, there have been instances where the annual cost can increase as much as 25% each year.

4) Return of Leased Equipment:  At the end of the lease it is the lessees responsibility to de-install, perform any repairs, pack and ship the copier back to the leasing companies facility at the cost of the lessee.

5) Early Termination of the Lease:  The lessor can charge an early return fee along with the remaining stream of payments in order for the lessee to return the copier before the end of the term.

6) End of Lease Notification:  All copier leases have an end of lease notification clause.  Some are palatable, like the 30 day notification before the end of the lease.  Others only give you a "window" of when the lessor can be notified that the clients intent is to return the equipment at the end of the lease. If you don't execute your letter of intent to the leasing company on time, they can charge additional lease/rent payments.

Now that you know these six potential pitfalls with a copier lease, it's up to you to read the lease, read the maintenance/supply agreement. If you have a questions, then ask.  It's your money. 

Below are some questions I would ask for each one of the above questions.

1) Do I have to have maintenance/supplies included in the lease?

Can we negotiate the cost of the annual increase?

2) Can I use submit a rider to the leasing company listing them as the loss payee incase of a catastrophic loss?

3) Can we negotiate the annual increase for the maintenance/supply agreement?

What is the percentage for the annual increase for each year of the lease?

4) If we upgrade our current lease with your dealership, can you take care of the return costs & shipment?

5) What is the cost for early termination?

6) Is there a chance to get this changed to a 30 day notification clause?

Questions, comments?  Please leave them in the reply below of feel free to email me apost@p4pHotel.com

For those of us that are in the business.  I thought I would write this for all of us to use this for those prospects and clients that are not familiar with copiers leases. In addition, this blog brings awareness that there are some vendors that have clauses in their leases that, well let's say that they are not in the best interest of the client.  Fell free to share, print and email.

-=Good Selling=-

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Comments (5)

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I received the below message via email yesterday. It's from Kevin Clune (President of Clune & Company LLC).  I've known Kevin for years and appreciate his insight with leasing.



Art, we haven’t talked in years but I still follow p4p. 

I liked your article about copier leasing but I thought I’d show you the attached marketing piece which shines a spotlight on some of the leasing industry’s most effective/injurious revenue enhancers. 

It’s a constantly evolving landscape as our industry is almost totally unregulated. 

These charges are technically legal but most of them are ethically challenged and are at cross purposes with any equipment dealer who wants to establish long term relationships with a client. 

Actually the biggest issue vis a vis “notice” at the end of the lease isn’t so much 30 days versus a tighter time window.  Rather, it’s whether or not the leasing company is compelled to “notify” the lessee of the window before the lease auto-renews for another 12 months if the magic letter isn’t received.  Statistically the letter is seldom written or received within whatever timeframe, as few company’s systems are set up to remind them of something to do three to five years into the future.  Several states have passed laws that require notification from the leasing company but whenever pending legislation starts up the leasing industry attacks it. 

As you noted insurance is a huge revenue enhancer as most companies meekly pay it rather than jump through the hoops that the leasing company sets to get freed from the charges. 

Some “sleepers” are Late Charges Assessed at One Day Late, Interim Rent and Property Tax Fees. 

Even perfect pay customers are frequently late if you change the definition of “late” from 10 days to one.

The Interim Rent game increases the total number of payments the customer will pay anywhere from one to three, depending upon on how it’s played. 

I didn't understand Cheryl's response either.

Another important question is the length of the automatic renewal. At least the "renews for like term" seem to have gone away but I still see some 12 month renewals. In my opinion, a customer should never agree to Automatic Renewal Terms of more than 3 months with the 30 day renewal being the obvious best choice.

For me, it's more about the integrity of the leasing company or the dealer pushing that particular lease company. Nobody plans on going into renewal. I just wouldn't want to do business with a dealer that would push such bad terms out to their customers.

Cheryl Goldburg posted:
Seriously? Which side are you on? Let's recognize that the dealer never pats for a lease return, it's just baked into the new lease. In this era of low margins, there is no room to offer these things for free. Additionally, there is no reputable dealer that would uplift 25% a year.

Cheryl

Thanx for the response! 

I'm on the side of transparency.  I want companies to recognize that there are some dealers that, well, they should not be doing business with.

Here in the North East we're seeing some down right dirty tactics when it comes to moving product.  You're right, no reputable dealer would uplift 25%, however we do have at leas one dealer that I know of that has the kind of uplift.

Not sure what you meant here, can you clarify?  "Let's recognize that the dealer never pats for a lease return, it's just baked into the new lease."

Seriously? Which side are you on? Let's recognize that the dealer never pats for a lease return, it's just baked into the new lease. In this era of low margins, there is no room to offer these things for free. Additionally, there is no reputable dealer that would uplift 25% a year.
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