When looking at copier leasing, it is interesting to see how some companies have very little choice on renewing their copiers with their current lease company. We recently were chatting with a potential client in New York City who have 15 copiers. They are frustrated with their current supplier and would love to get out of their lease. It is going to be tricky for them though. About everything is set up so that change is hard, even though their service is bad and the communication is terrible from their current vendor. They called us to help them with their copier lease situation because they found us through our copier leasing site.
We began this process about 6 weeks ago. The first step was to gather information on the current leases. Took the copier company about 2 weeks to get anything back to them at all. What we found, when they got their information was they had a pretty substantial mess on their hands. The buyout amount was roughly $85,000. Their current lease pricing was about $3300 per month. We worked out what the copiers we would sell would cost, and it was only $1950 for similar units. But, to get rid of the current copier, $85,000 had to get wrapped into the new lease. Since they only wanted to be on a 4 year lease at most (currently have a 3 year lease), it adds about $1878 to the $1900, thus making it about $400 more expensive and making that expense last for 4 years, when some of their copiers expire this year.
We thought about this issue, and looked at the stream of payments. That was about $48,000. Storage and shipping of copiers was about $12,000. So it was certainly an improvement, about $30,000 better. This would be $1,325 per month, making the monthly slightly cheaper than the current copiers. Of course, nothing is this simple. If they did this, and any of the copiers had base supplies and service plans, it could easily go back to the $90,000 type number.
The client could wait and do some of these now, wait a year batch some more, etc... that would be great, but that leaves the sites that are not getting service in bad shape. So that is also less than ideal.
They could refresh the equipment with the current supplier, hoping that new machines would break less, but eventually they would be right back where they are today.
We thought their ideal choice would be to use 4 of their current copiers (the ones that are the most expensive to return) in their sites that are short term. Get 10 copiers, leave 5. This is a way to get the liability down as much as possible and not have a supplies and service contract to worry about. We found if we could focus on the 5 biggest losers, the costs could go down $1,000 per month, and the ones left over would be at their less important sites and a small backup printer could go there. This gets the lease returns closer to $18,000 ($350 a month hit), but reduces the current costs a ton. We are waiting to see if there are any more crazy supplies and services plans we haven't been told about yet.
Really, in situations like this, you need a rep who understands copier leasing and how the industry works to help you negotiate the deal as much as possible and make the damage to you as minimal as possible. We love to come up with solutions that can be wins, even if they are not ideal copier lease agreements.
If you have a copier leasing situation, please get in touch with us or a local dealer you trust. We would love to help you out!
What should this customer have done?
In getting the copiers, there are some things this client could have done to not be in this situation or at least not as challenging of a version.
1. Have all the leases end at the same time so that it isn't 1 lease every 2 months for the next 3 years. Had they had them all on one, even if they had a year left, they could have bought 15 small backup units, waited a year out, and then bought new copiers from someone else with no penalties.
2. The copier lease return can often be negotiated with the dealer or the bank, it may not be as set in stone as you think. It is always worth thinking creatively to avoid excess charges. For example, if this client could convince the bank to just do remaining stream of payments rather than FMV, will save about $40,000.
3. Make sure to work with a dealer you can trust and treats you well.
4. Get a couple of quotes from different dealers. Ask about service times and if there are penalties for not meeting the agreed upon service times.
5. Check firmware and drivers, sometimes the copiers will be breaking too often because software is out of date.
No one likes being in a bad lease. Feel free to call if you have copier lease questions.
-=Good Selling=-
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