The Nuts and Bolts of Leasing: What Every Small Business Should Know

To lease or to buy? This is the question many small business owners face when the time comes to invest in a new copier or multifunction printer (MFP) for the office. Others, perhaps newer to business, may be surprised to learn that leasing is even an option. Isn’t leasing something you do with cars, not printers? But as you shop around and get familiar with the world of office equipment, you’ll learn that printers and copiers come at many different price points, and often it can make more sense to lease a device rather than to buy it outright. But when? It can vary from business to business, but here are some questions to ask when considering a lease.

What kind of device do you need?

MFPs come in many sizes, speeds and capabilities, and their prices are similarly varied, ranging from a few hundred dollars to several thousand. Prices are affected by things like speed (generally the more pages per minute the device prints, the higher the price tag), page volumes (some are designed for 5,000 pages a month, some for 50,000), black-and-white or color, document size and more. For example, additional options like stapling, hole-punching, folding or multiple paper drawers will add to the price.

It’s easy to assume only large organizations will need big, high-speed devices with a lot of bells and whistles, but an SMB can easily have in-house printing needs that justify the cost of a fast, color device with multiple finishing options, such as stapling, collating or binding. Since the outright cost of such a device could be prohibitive, leasing allows organizations to acquire these devices and save money long-term without the large up-front expenses.

What are the different leasing plans available?

If you search “office equipment leasing” you’ll find many different financing options, but most of the differences are in the details. Typically, leases come in two basic forms. Fair market value leases, also called operating leases, are flexible and affordable options that offer the lowest monthly payments. Because the company leasing the device does not own the actual hardware, it doesn’t need to be tracked as a company asset; however, the payments are deductible as operating expenses. End-of-lease options include renewing the existing lease, purchasing the equipment at fair market value, simply returning the equipment to the leasing company, or the most common option of upgrading to new equipment through a new lease. You’ll want to fully understand your responsibilities when choosing which end-of-lease option you want to execute.

Capital leases, or $1 buyout leases, allow the company to own the equipment at the end of the lease for $1, as the name implies. Since in this case, you are financing the entire purchase cost, the hardware is an asset owned by the company, and the monthly rates will be higher. However, the tax advantages at year-end under this type of lease can be significant, as Section 179 of the Internal Revenue Code and bonus depreciation may allow businesses to deduct up to 100% of capital leases in the first year.*

What type of service plans are available?

Many other variables can come into play when it comes to leasing options, including costs of service and supplies. Just like cars, copiers and MFPs need preventative maintenance and will also need repair or service calls at some point. Service agreements, which cover both, can be bundled into leasing agreements. These agreements can cover all kinds of things – from the obvious, like replacement toner cartridges, to the less obvious, like service technician travel costs.

Whether the printer or MFP is billed on a cost-per-page (CPP) basis, a per-user (or per-seat) basis, or another pricing model, the total amount can be rolled into the cost of the lease. The benefit of this, of course, is that the business has just one regular invoice for all equipment, supplies and service. This makes budgeting much simpler, as there is little risk for unplanned expenses (relating to the office equipment, at least).

Is leasing always a good idea?

It’s impossible to say unilaterally that anything is always a good idea. That’s why you’re reading this blog. The best move for each individual business will depend upon all the factors we’ve touched upon, and that, in turn, is something only users in your business can tell you. Particularly in a smaller business, the “multifunction” part of the MFP will really earn its name, and it is important to understand how much and for what purposes each department or individual worker will use the device.

For an SMB without the resources for a large upfront purchase, but with printing, copying and scanning needs that require something more than a desktop printer, leasing is certainly an option worth exploring. Talk to your local dealer or service provider about the options available and discover whether leasing can benefit your business.

*NOTE: This article is not intended to convey tax advice. Consumers should consult their own tax advisors to confirm the consequences of their business transactions.