For many businesses, financing equipment that is subject to depreciation not only makes the most logistical sense but also the most economic sense. Why should you pay to own something that will only get worse over time? Unless your company can afford to simply purchase all of your printers, copiers, and MFDs (that is, if you’ve determined that that’s the way you want to go [link to lease vs. buy copiers article]), you’ll likely want to lease these devices from an authorized equipment dealer. Once you’ve decided to do so, you’ll probably need to discuss the following question:
“Would you like an FMV or a $1 Buyout lease?”
“A what and a what? Huh?”
To translate the “Greek” and remove all confusion, let’s take a look at these most common styles of copier and printer leases— the FMV or $1 Buyout. After that, we’ll explore which one is the right fit for your organization.
Fair Market Value Leasing
A Fair Market Value (FMV) Lease is the most popular way to lease business equipment—and by “most popular,” we mean that “FMV” is almost synonymous with the term “lease” in this context. In an FMV lease, your company pays a reduced monthly rate for the use of said business equipment for a set period. Once the term has expired, your organization can then either negotiate a new lease, continue paying the same payment on a month to month basis, return the devices without penalty, or purchase the equipment for its adjusted “fair market value”—a price that takes into account equipment depreciation, wear, and other factors.
“Who is best served by an FMV lease?”
Your company will likely be best served by an FMV lease if your organization:
- Values only using copiers that are no more than three-to-five years old
- Would like to keep your monthly lease payments relatively low
- Is not likely to want to purchase your machines at the end of your lease
- Wants to keep up with the latest technology
$1 Buyout Leasing
A $1 Buyout Lease is a lease agreement whose term ends with—you guessed it—the ability to buy out each device for $1. Also known as a “capital lease,” this plan comes with a higher monthly payment but is essentially a path to device ownership. A $1 is price-tag at the end of your lease, in a sense, is the price of ownership for the equipment.
“For whom is $1 Buyout Lease best suited?”
Your company will likely be best served by a $1 Buyout lease if your organization:
- Does not necessarily value having the latest device technology
- Is looking for a path to purchasing used-but-suitable devices
- Could afford to finance device ownership, but, for tax purposes, would benefit more from leasing over purchasing equipment
The “Better” Deal Explained with Smartphones
For the sake of explaining which lease is “better,” let’s compare both of these lease-seeking organizations to two different kinds of smartphone users. An FMV Lease would be a better option for the technophile who values having the latest, most featured-dense smartphone in their pocket. The use of the most up-to-date device would be more important to them than being able to claim full ownership of the smartphone or the ability to switch carriers. On the flip side of that coin, for someone who prefers the eventual flexibility to change carriers following a pay-off, but without the promise of a smartphone camera upgrade every two years, the $1 Buyout Lease option would better suit their needs. Either option offers significant flexibility, but also requires certain tradeoffs.
Preference for either type of equipment lease, or a lease option at all, depends entirely on your company’s business needs and technology philosophies.