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Lease, Rent or Buy a Photocopier – which is best?

Finding the best photocopier deal:

Shop around – check with different finance companies as to whether they are interested in financing the type of equipment you’re purchasing and what their indicative interest rate is and whether other costs such as establishment fees apply. Always ask for repayment amounts and the interest rate for the same term, so you can better compare rates.

Homework – prepare a finance proposal where you set out specific details of the equipment, the terms of the finance and your business history and business case, including financials and tax returns for the last two years. A solid business case will assist in minimising the rate of interest applied as financiers will apply a risk margin.

Brokers\accountant – finance brokers or your accountant can greatly assist you in sourcing the best interest rate/finance and collating all information for your application.

Other options:

Other finance options include hire purchase, chattel mortgage and loan (principal and interest or interest only) secured against real property.

Hire purchase (HP)/asset purchase – GST credit is generally claimed by the purchaser and a finance company generally funds the GST. You claim a deduction for interest and depreciation, the loan liability is taken up in the balance sheet. The asset is included in depreciation schedule and, compared to a lease, deductions are likely to be more in the early years and less in later years.

Chattel mortgage – works in a similar way to a HP, except if you are on the cash basis for GST reporting, you can claim all GST credits up-front. The establishment fee is normally more than HPs.

Main features of Photocopier Rental

•  Off balance sheet reporting
•  100% tax deductible repayments if used 100% for business
•  Preserves working capital for other purposes
•  No residual value liability
•  Ability to upgrade – reduces equipment obsolescence
•  Opportunity to purchase after contract ends may be offered
•  GST on payments can be claimed on BAS
•  Directors guarantees may not be required

Main features of Photocopier Lease

•  On balance sheet reporting as an asset/liability
•  Accounting maybe more complex – depreciation of asset
•  Preserves working capital for other purposes
•  Residual value liability
•  Contract to be paid out in full prior to upgrade
•  May involve early payout penalties
•  Less flexible upgrade path if required during contract period
•  GST on payments can be claimed on BAS
•  Risk of owning an obsolete device
•  Directors guarantees may be required

Main features of Photocopier Purchase (cash)

•  On balance sheet reporting as an asset/liability
•  Accounting maybe more complex – depreciation of asset
•  Reduces working capital
•  No residual value liability
•  Upgrades or add-ons to be paid for – reduces working capital
•  Risk of owning an obsolete device
Disclaimer: CopierChoice do not provide financial advice. The information above is purely provided as information only. Please do your own research and obtain professional advice before making decisions on financing your equipment.
There are numerous issues to consider before determining what sort of finance to use when purchasing a photocopier, be it leasing, hire purchase, rental or other forms of finance.

It is always a good idea to conduct a cost vs. benefit analysis. This will ensure that the benefit obtained from a photocopier will provide an adequate return on investment. In a business that generates income from copiers, such as a printing or photocopying business, revenue vs. cost is easily measurable. For office copiers, the equipment itself does not actually generate revenue, and so it is more difficult to measure. One of the main benefits usually is the ability to do copying and printing in-house, rather than paying for it at a print/copy shop. Depending on the volume of copying & printing done, there is often a break-even point for a business where purchasing a photocopier for in-house copying, printing, scanning etc. will be more cost-effective.

Most businesses lease or rent their photocopiers. The primary reason for that is that no capital is tied up and can instead be used for other purposes. Additionally, because copier technology changes quickly, finance methods such as renting provides an easy upgrade path, with the benefit of rental payments being fully tax deductible in Australia.

As with most products which are financed however, leasing or renting costs more in the long run. Although when tax deductions are taken into consideration, they do become a competitive option that must be considered. Be a bit careful with rental or lease agreements which include the service component of the copier or multifunction device and charge the combined rental and maintenance cost on a per-copy/print basis. These are always based on minimum monthly copy minimums. It may look attractive overall, but complex ‘contract’ language around minimum volumes can disguise higher costs in the future. When financing a copier purchase, make sure that whichever method you decide is best for your business, you understand all terms and conditions of the agreement.