In many years of selling wide-format products, I can honestly say that equipment leases tend to confuse people more than anything. First of all, there is a ton of information to process with the new technologies themselves, such as Océ CrystalPoint Technology. Likewise, some buyers tend to freak out when it comes to product acquisition in general. Admittedly the topic of office equipment leasing can be daunting, but if you understand some leasing basics, you might just see how it can empower you to leverage the best wide-format plotter or scanner technology you can get without a huge cash outlay.
Here's how it works, from a vendor's perspective. Usually, the selling dealer will not want to hold a long-term liability on a piece of equipment. Therefore, it only makes sense for a reseller to partner with a leasing company that will take ownership of the asset during the term of the lease. So, when the deal is done, the leasing company actually purchases the equipment from the dealer and will collect monthly lease payments from the end-user.
In our case, we generally use either Canon Financial Services or GreatAmerica Leasing Corporation. But, there are a vast number of leasing companies and brokers out there to choose from. And they all provide the same type of service.
While there are several different types of leases, the two common are the "$1.00 Purchase Option" or the "Fair Market Value" lease. Let me explain the differences between the two.
The $1 or"Buck Out" lease is nothing more than a typical financing schedule. But, since it is a lease, there are some tax advantages available. But, you will still have to depreciate the equipment over the term of the lease. Once you have reached the end of the agreed term of the lease (i.e. 36 months), you simply pay one final payment of $1.00 and you will own the large format equipment, outright.
The "Fair Market Value (FMV)" lease is the one that seems to be the least understood. Essentially, it is identical to renting a car. It is based on an agreed term with lower monthly payments than a typical finance schedule. The FMV lease also offers the most flexibility of all the lease programs. At the end of the lease term, you have the option of purchasing the equipment, upgrading your technology with another lease, or simply turning the equipment in to the residual asset branch of the leasing company.
Keep in mind, the buyout residual at the end of a FMV lease is like a balloon payment - similar to leasing a car. I have seen some shady deals out there with some end-of-term residuals. But, I can say that one of the reasons we stick by both Canon Financial and GreatAmerica Leasing Corporation is that they cap all of their residuals. This ensures that there will not be wild fluctuations in the end-of-term buyout amount. Typically, it is safe to plan for a 15% buyout residual. So, for example, if you have a 36 month/$10,000 lease for a plotter and scanner, your monthly payment would be $305 and your end-of-term residual would be $1,500.
True, the sum of all the parts is much more than the original price of $10,000. But, keep in mind, all of those lease payments can be a tax write-off for your business. This allows you to take advantage of the benefits throughout the entire term. Plus, you get the latest state-of-the-art technology for your office without having to invest a ton of capital initially.
For a more detailed explanation of wide-format equipment leasing, see our page on the benefits of leasing. While leasing is definitely worth exploring, please consult your accountant or finance professional for the best advice for your company.