The new tax law may increase the temptation to lease office equipment, but don't fall for it, at least not when you're shopping for small photocopiers. With or without tax breaks, it seldom makes sense to lease, rather than buy, that type of equipment. "We get $172 a month for leasing a copier that would cost the customer $5,000 brand new," says one successful distributor we know, who both sells and leases office copiers (and who, understandably, wishes to remain anonymous). "You figure it. A standard lease runs 36 months, so you're paying $6,192 over the life of the contract, after which it costs you an additional $500 to buy the used copier. That's $6,692 for a machine you could have had for $5,000 -- a 34% markup." From another perspective, that's the equivalent of paying an annual interest rate of about 19%.
Customers often lease, he notes, because they are afraid of getting stuck with outmoded technology. "But no leasing company will guarantee to upgrade the technology of equipment it has out on lease. And, anyway, most companies tend to use a copier until it wears out, which could be 10 years." And don't assume that leasing the equipment will spare you the ongoing hassles of maintenance, which is usually covered in a separate service contract, whether you lease or buy. "I really don't understand why anybody leases copiers, but they do," says our distributor. "And, hey, if they want to give me their money, I'm happy to take it."