Fixed rate service contracts

[jasonlesher]

Hello - this is my first time posting here, so please forgive me if I'm wading into territory that's been discussed before.
I'm the son in a very small family business. We got our first digital equipment four years ago, a Konica C7000 that was just being replaced by the 1070s. After the first year, our local vendor quit servicing production equipment and handed service over directly to Konica, along with a load of parts that we held onto for over a year. Konica kept our click rate the same for the first year, but after that, they've been going up 10% per year, which leads to a drastic difference in cost over a 5-year lease.
I'm now in the process of replacing the C7000 and not quite sure what to expect in change in service rates. Konica presented an offer that locks us into 5 percent annual increases, with low starting rates. However, the lease for the 3070 is almost double what we're paying for the 7000. I'm also talking to Canon CSA and a local family-owned company that sells and services Canons. CSA is offering an 850 with fixed service rates. Local dealer, with 6 ImagePress techs, says its not possible to do the job right with a locked-in rate for 5 years, especially with the rate CSA is giving us (which is a good bit lower than the average I saw in the National Print Resource Center report referenced elsewhere in this forum.) The CSA black rate is high, and since we don't have a black only machine and currently print twice as much black as color, it's enough to make a significant difference in the first year or so.
If I can count on good service and locked in rates from CSA, it seems the better choice over 5 years. But the local dealer has me worried that after a few years CSA wouldn't be making money any more, and force us to renegotiate or walk away from the service agreement.
I guess I have two basic questions - what should I expect or service/toner rates over years? 10 percent increase a year seems crazy, but a locked in rate as the machine gets older over 5 years seems almost just as crazy.
And, in general, does Canon CSA do a good job servicing commercial print shops?

 

[jrsc]

Welcome to service from Konica. They are famous for making an offer, then transferring your service to someone that won't honor the pricing and doesn't know how to service the equipment. Anybody should be able to lock in pricing for 5 years. You can write it into your contract that they have to maintain a specific service level or there are penalties and that they can't transfer or drop you without your permission. You can say if they can't stand by their end of the deal they are required to buy out the lease. Just make sure it's all in writing. The production digital press market is so competitive right now you can ask for just about anything.

 

[msaeger]

I think fixed for the length of the lease is pretty normal but as far as service being affected by that I doubt it would really matter.

As a the person fixing the machines I can tell you I don't really even know what people are paying unless I ask and even if I do it's not like I am using that as a tool to decide how well to fix the machine.
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I think the service level will be more dependent on how many people they have, how big of an area they cover, what the manager is like, what the operator is like.

 

[MailGuru]

ALWAYS lock in your click rate over the life of the lease. We didn't on our first machine (Xerox), and the click charge increased about 12% per year, but, we learned our lesson. The only reason a locked in rate isn't offered by your salesperson in the first place, is that it is an "easier" sale by offering a very low click rate. They will give it to you, you just have to specify that is what you want. A locked in rate, is slightly higher at the beginning, but, you'll save thousands over the life of the lease. It also simplifies your pricing calculations because you will always know exactly what your click charge is, year to year.