Friday, April 5, 2013
End of MFP Copier Lease Equals Balloon Payment?
It seems to me that the administrators frustration is the large balloon payment, and they were not getting any help from anyone with Ricoh to give them an itemized breakdown of the costs associated with the balloon payment.
Now, it's not uncommon that most people who sign copier leases do not read the lease, and when they do it's usually too late (meaning after the lease has expired). Thus I thought I would post a thread to help them understand a Fair Market Value Lease and why there maybe a balloon payment. In this case I think the balloon payment could be extra payments because the lease is in an auto renewal. In any case here's the response I wrote:
FMV (Fair Market Value): There is also an evergreen clause in all copier leases, meaning you need to contact the leasing company within "x" amount of time prior to the expiration of the lease to notify them of your intention to either buy the systems or return them. If you do not notify them, some leases have an automatic 30 day renewal, 90 day renewal and the real bad ones have a one year renewal which means if you don't contact them in time (with a certified letter) your lease will renew in either 30 day periods, 90 day periods or one year. So, lets say your lease expired yesterday and your contract has a 90 day renewal, you are obligated to make three more payments, but you still need to send them what we call "A letter of intent", if you don't send the "letter of intent" your lease will keep renewing at 90 day periods.
There are four options with a FMV lease:
1. Buy the equipment
2. Return the equipment at your cost
3. Trade in the equipment
4. Keep leasing the equipment with the renewal periods that are stated in the contract
You may be caught in a renewal cycle and the rep maybe trying to hide it with the large return fee. I haven't seen the lease so I can't consult on what has happened.
You need to get a copy of the lease, find out when the equipment was delivered, that will be the actual start date of the lease (not when the lease was signed by someone at your company), you also need to keep in mind that most all copier leases are billed a month in arrears.
When working with the leasing company (it may be Ricoh), but never ever ask for a buyout (they will then quote the price for you to own the equipment, you always want to ask how many payments are left on the lease or the remaining stream of payments).
Wiping the hard drives, some of the systems keep the copier OS on the hard drive, so in this case I would recommend hard drive replacement for each device. You'll need to buy new hard drives and have them swapped out, you keep the old drives and send the equipment back with the new drives. When buying or leasing new equipment, there are now features in the new systems that may have a feature named "end of lease" which erases the data on the systems or Disk Overwrite feature.
Hope this helps, feel free to reach out to me if you have an additional questions.