Business Equipment Leasing Tips

May 16, 2010
Mango runs the IT department at his day job, which involves evaluating business equipment for purchase or lease. Here are a few tips that we would really like everyone to know. Or if you don't care about leasing but like making fun of sales people, you can just skip to the bottom. Find out the Purchase Price Every salesperson we have spoken with has required massive amounts of convincing to reveal the purchase price of a piece of equipment. We're not sure if it's because they don't want us to get sticker shock, or if they're on commission from the leasing company. But here's an example of why the purchase price is something very important to know: maybe it's far cheaper to purchase than to lease it! We currently have a printer on lease that cost an astonishing FORTY-FOUR PERCENT more to lease than it would to purchase. (Mango hastens to add here that he was NOT the one who made that deal.) At this rate, it would have been cheaper to even put the equipment on a credit card, or better still a line of credit. ALWAYS negotiate a buyout. Here's another advantage to purchasing equipment: when a typical lease ends, you get...nothing. If you've negotiated a buyout, you can purchase the equipment for 10% of its original value, or even something lower like $1. Then you have the option to actually own something after paying for it for five years. Myth: If I purchase equipment, the company's service contract won't cover me. Not always. Sometimes, the service contract is separate from the lease, and completely optional. You can purchase the service contract separately, not at all, or on an a la carte basis. Girl, you've got nothing but time. Maybe that's lyrics from a Sara Evans song, and maybe you're not a girl, but you still have nothing but time. Don't be taken in by promotional pricing that they can "only guarantee until the end of the quarter". These people want your business. Every time we've said, "well, we can't do a deal until after the quarter, but we like that price," they've said "...well...ok." Could you outsource? If you're doing a lot of production in-house, consider outsourcing it. We considered replacing a very old and decrepit folding machine and were dismayed by the prices we were quoted. Then we investigated outsourcing all our large volume mailing. As it turned out, after we factored in staff time, we discoved that we could pay to the outsourcing company exactly what we currently paid to do the work ourselves. It was a bonus not to have to do the work, and as an additional bonus, we didn't have to replace and maintain expensive equipment. Is it really worth it? Maybe not. Why not divide the monthly cost of the equipment by the number of times per month you expect to use it? Could you live with home office-grade machines? We find it very economical and convenient to do our own colour laser printing. We were offered some very large and very very expensive colour laser printers by various office equipment companies. We ended up purchasing a Xerox colour laser printer online for an astonishing $30 + toner! Off-brand toner is approximately half the price of OEM toner, and in this case the image quality looks exactly the same. This brought the cost of an average page with 50% coverage (we think figures based on 5% coverage are worthless) to an appealing $0.09 - exactly half the price of the cheapest local print shop. True, it's a much smaller machine than what we were offered by the office equipment companies - in fact, it sits on a desk - but it did come with a year of free on-site service, and is more than up to the task of printing several hundred pages in a day. We used eBay saved searches to find excellent deals on extra paper trays, a duplexer, and spare parts that we will one day need to replace. Put the expiry dates of leases on your calendar, in advance if you need to. We do this, and we also have a sticker on each piece of leased equipment that states when it expires. The reason is: sometimes, the contract states that the lease auto-renews itself for a year (or five!) if you continue to pay for it. Sometimes it states that the lease must be cancelled at least three months before the end of the term. To get around this, we simply submit a letter at the time we sign a lease stating we wish to cancel the lease at the end of the term. (It qualifies as "at least three months"!) Read the contract. Read every single word. We needed to replace a mailing machine. Fortunately, there are only three companies in Canada licensed by Canada Post to manufacture postage meters, so research was relatively simple. We were intrigued by a machine offered to us by Pitney-Bowes...but dismayed to find the contract was four pages long and written in positively microscopic-sized font. Buried on page two, in the middle of the section about obtaining service to the machine, was: "PBC may change the services, the terms pursuant to which the services are provided to you, or terminate such services, upon written notice to you." Wait, what?! They can decide that they don't want to provide service to us, on a whim? Oh, but it gets better! On page four: "After the first year of the initial term, PBC may increase the subscription and/or rental fees upon 30 days prior written notice." Yes, you read that right. They can actually increase the rental fees of the equipment and there's nothing you can do about it!! We mentioned this to our salesperson, and her response was a shocking, "Well, it probably wouldn't go up by much, if at all." We asked how much it had gone up in the past, but were not surprised to be told that she was "not able to provide that information". We suggested that since it wouldn't go up by much, she wouldn't mind giving us a different contract without that provision. She told us she couldn't do that. We asked for permission to terminate the lease early without penalty if the rate went up. That too was shot down. Needless to say, we didn't sign THAT one. Find out what consumables cost. Find out exactly what consumables cost, including shipping and handling, and whether or not you can get them from off-brand suppliers. (You'll have to figure out this last one on your own.) Find out how long a consumable will last in the real world. Toner cartridges for printers are often quoted by how many pages they'll print at 5% coverage. 5% coverage is about equivalent to a small logo in one corner of the page. If you plan to print more than that, and you almost certainly will, the cartridges will last for a significantly less number of pages. On the other hand, maybe it's okay to have expensive consumables. If your machine is inexpensive enough that it offsets the cost of the consumables, perhaps it will even out. We had someone once tell us that their printer was the best because their cartridge lasted for 30,000 pages and cost "next to nothing". Perhaps it was true, for given values of "next to nothing", but their printer itself was nearly double the price of everyone else's. For our use, there was no possible way that total cost of ownership would have been cheaper. Tips for specific types of equipment:
Copiers and printers If you have to pay for toner, find out how the machine calculates how much toner is remaining. Some cartridges have a counter that counts up each time you print a page. A friend of ours has a Samsung printer that does this. But here's the problem: the counter increments whether or not you've used that colour! So if you print a few thousand pages of plain black text, your colour cartridges will be worthless, even though you haven't used them! Our favourite printers have bottles of toner instead of cartridges. These bottles have no counter; the printer simply uses them until they're empty. They're also very very easy to refill. If you purchase a home office-grade printer, try and find one that can be connected to a network so that you can share it amongst a few computers easily. Also, consider a model that supports PostScript. PostScript is useful for many reasons. For example, if the printer manufacturer does not provide drivers for Linux, but the printer supports PostScript, it's often trivial to make it work. Postage equipment In Canada, Canada Post prohibits you from owning a postage meter. However, you can own a postage machine. One is completely useless without the other. Sometimes, the contracts for the meter and the machine are separate, so if you decide to cancel a contract, be sure to cancel both. Better still, choose a company that only asks that you sign a single contract. We investigated purchasing a postage machine and renting a meter. However, the meter rental was only a few dollars less expensive than renting the machine and the meter together. We mentioned Pitney Bowes before. We've also used equipment from Neopost. It had a device to automatically seal envelopes, but we were never able to make it work particularly well. We had their technician come in a few times to service it, but with very little success. One day, we received two letters in the mail: one from Neopost, and one from the local Neopost dealer. The letter from Neopost was not sealed. The letter from the dealer was taped shut. After this stunning display of confidence in the company's own product, we gave up trying. We currently use a machine from Francotyp-Postalia. It is a quarter of the price of the machine we used to have from Neopost with the only difference being that the scale is a few kg smaller.
Do you like the salesperson? Finally, follow your instincts. If your instincts say the salesperson is honest, (and you have good instincts,) they probably are. Here's something to watch out for: if all the salesperson will do is tell you everything they can think of that's negative about their competitor's product, that's a bad sign. If they'll actually talk about their own product and tell you about everything positive about it, you're probably ready to do a deal. And finally, if you start hearing quotes like have our permission to laugh at them and then write about it on the internet. Him: "...and the competitor's model doesn't have an automatic feeder!" Us: "Actually...according to their salesperson, yes it does." Him: "Nope. I can assure you that 100%. It doesn't have an automatic feeder." Us: "Ok, well, we won't argue with you about a product that's not yours, so--" Him: "IT DOESN'T!!" [We took the competitor's product. It had an automatic feeder.] Him: "This is a GREAT deal! It's the best deal you're gonna get!" Us: "You told us that with the deal you offered us yesterday, and the deal you offered us two days ago. But each time you've said that you've later offered us a better deal." Him: "But this IS the best deal you're gonna get. You're just gonna have to trust me." [Three days later, he offered us yet a better deal. We selected a competitor.] Him: "You could go with [model A], or you could go with [model B] for just $30 more per month." Us: "What's [model B] do?" Him: "It's..." [shrugs] "...better. Better built." Us: "So your [model A] isn't well-built?" Him: "Oh, [model A] is well-built too." Us: "What features does it not have that [model B] does?" Him: "Not...really any. But it's better. In your case I'd recommend it." [he wanted us to take a refurb] Him: "You can tell it's been well-taken care of. You can just tell by lookin' at it." Us: "It' scratches and dents all over it." Him: "Yeah, but it it works well. Inside. You can just tell by lookin' at it." Us: "Ok. How can you tell that?" [We expected some sort of explanation for his claim. Apparently our question was not specific enough.] Him: "By lookin' at it!" Him: "Oh, a binding machine! When you want to replace that, talk to me! I know all about those!" Us: "That's a paper cutter." Him: "So, when you're thinking about replacing your machine, just give me a call!" Us: "We doubt we'll be doing that. The current one breaks down all the time and it's terribly frustrating to use. It's also too expensive for the amount we use it." Him: "Well, I'm sure you'll like our newest model. I could let it go at [price that's much more than what we're paying]." Us: "That's even FURTHER from being cost-effective." Him: "Well, we're not going to know that for sure, are we? Not until we come in and do a complete collective cost-comparison analysis!" [We are NOT going to purchase anything from a salesman who can't even think of a buzzword for "analysis" that starts with a C.]
January 18, 2013
Thank you so much for this article. I am currently looking at leasing an office printer. You have saved me a whole lot of time, money and future aggravation. Thanks!