Leasing a copier, also called an MFP, is an extended payment option for business who need to upgrade or replace their current equipment, or obtain new equipment with flexible payment terms.
Leasing allows you to pick a payment term, typically between 12 and 60 months. Lease types include Full Market Value (FMV Leases) or $1 Buy Out leases. Both are simple and common lease in the copying and printing industry.
A FMV lease gives you three options at the end of the lease term which you can choose from to accommodate your business need. Value is captured at the end of the lease.
1) Upgrade at the end of the lease
2) Return equipment to the leasing company
3) Purchase the machine for fair market value.
Unlike a fair market value lease, with a $1.00 Buy Out Lease, payments are higher because the leasing company is capturing up-front costs each month for you to own the copier at the end of the lease term. Thus, you own your machine for a dollar when your lease is complete.
Each situation is different and your account representative can help guide you to your individual business situation. It may make sense to lease a machine if you are confident that you are capable of paying your monthly payment, each and every month, and on time until your machine is paid off or your lease is complete.
Ask yourself these questions:
- Do you anticipate growth or changes in your company over the next 5 years?
- Are you a non-profit?
- Are you a government entity?
- Are you on a fixed budget?
- Do you need any additional tax benefits or considerations?
Meeting with an experience account executive can help you understand what questions to ask and what directions to take to determine which of these solutions will be best for your business in the future.
Leasing (and renting) can also qualify your business for different deductions. Most standard and accounting practices allow for leasing and renting copier write offs entirely during the month. Direct purchasing is depreciated over time, typically 5 years.
However, Section 179 offers a counter to this measure. For more information about Section 179 and how it can affect your returns in 2020, read "Section 179 | 2020 Incentives for Your Business".
As always, it's best to consult directly with a CPA or tax attorney when devising a strategy that works for your business.