Lease vs Purchase copier

[evoprinting]

Hello, I've been in negotiations with KM to lease a 6501. Is anyone out there purchasing the equipment via a loan? I've been quoted $32000 for the copier. The 48 and 60 month Fair Market lease rates are about 3% higher than the loan interest rate I'm getting. I'm trying to figure the advantages of leasing? I would be saving money on the loan payments (vs lease) and at the end the machine is mine. Am I missing something? Thanks!

 

[OutSourceD]

If you do not have the cash to buy outright, take a short term lease option. You'll own it in 2-3 years. In my opinion, this is hands-down the best color machine on the market. Your service clicks should be under 4.5¢. for 11" X 17".

 

[Krista]

I know with Xerox, when you lease, some parts/service contracts are cheaper, and if they can't fix your press, you get a new one. They also have a lease that will replace your press every X number of years. Also, research the third party market value - it may not be "worth it" to own your press.
We currently have an old Xerox 6060 that we don't use, but it would cost more to move the thing then what its worth, so there it sits.

All of that being said, we own all of our Xerox machines, mainly for the tax incentives.

So there are a few pros depending on the company you are buying from, have you asked the sales rep? He may be able to point out some key differences in owning/leasing.

 

[Craig]

Talk to your accountant, see which has the best "value" at tax time. We have always leased our digital equipment simply due to the fact that I very rarely keep a machine for the length of the lease. Either I kill it or I need something better and faster, or the maintenance cost are much cheaper on a new device.

 

[X33]

The purpose of leasing is to have a monthly operating cost, not to own it at the end of the lease.

You don't want to own a machine like that after 3-5 years; it's not worth it.

If you are in the U.S., go with leasing. Now, be careful who are you leasing with, is it the vendor directly, or is it a 3rd party financial intermediary? I don't know if KM has direct leasing, I know Xerox does, and there are some advantages to that.

If you take a loan with a bank, they will just like to collect their money no matter what. If something happens to your machine because of supplies or service, you still have to pay the loan. If you are leasing directly with the vendor, the story is a little different.

 

[lfelton]

Depends.

One thing to consider is that at the end of your 5 year lease, the machine will be completely worthless (which is why the lease option is more expensive than the loan - compare that with a lease on a car, where there is a predictable residual value), so it will be up to you to dispose of it. That may well be quite expensive and needs to be factored into your costs.

On the flip side, consider the relative cost of early repayment, if that's something likely to happen. Unless you completely screw up on the terms of your loan, it should be repayable on demand and your "settlement figure" should be limited to the outstanding capital plus a reasonable administration fee for early settlement. As long as you understand amortized loans, there should be no surprises. That's not always the case with standard equipment leases, where you have entered into an agreement to pay them x amount over y months. Unless the early settlement is tied into an equipment upgrade deal with the same manufacturer, the finance company will generally want their pound of flesh, i.e. the entire amount outstanding on the lease.

Unfortunately, many small business people have little experience with finance or legal agreements and some get badly screwed over by vendors and equipment finance companies. Craig gave you the absolute best advice; speak to your accountant.

 

[MY04]

I’m always amazed at the people that want to buy/lease equipment in an economy where you can pick up good used equipment for next to nothing. If you keep your eyes open and stumble around the internet, you will be amazed at what you can find. The people I know do not express the opinion that anything KM is a good box…it may be cheap…but if you want good…my opinion would be go with Xerox.

 

[Milo Wilson]

The first thing you should always do is check out refurbished equipment prices. You can save a ton of money versus new. The only thing you have to do is make sure your getting a truly refurbed machine..ie HFSI's done, stripped down, cleaned and repainted is a truly refurbed machine.

 

[Mark H]

If you buy it you can only take the depreciation as a write-off at tax time. This is often much less than the cost of the payment (if you financed it) or the value if you paid cash and had kept the money in the bank earning interest. If you lease it you can write off 100% of the cost each year as an operating expense.

Talk to your accountant about which option will make the most sense come tax time. In the end, however, you must also consider cash flow and if you can garner financing for the equipment acquisition.

Mark H

 

[Robertjohn]

In my opinion, leasing is best. If you do lease, remember to follow the terms closely. The best way to go is write your letter of intent at the end of term and start a new lease. Although early upgrades help keep with the changing time on 5 yr leases, they never truly benefit from 3 year leases.
If you end of buying, the Federal Tax write off is: Section 179 Deduction. you can find all pertinent information at Section 179 Tax Deductions for 2010 | Section179.org

-- You can ALSO get this same Tax write off from a $1 buy-out lease (which would apply if you lease a refurbed machine).