How Copier Leases Work: FMV vs. $1 Buyout, Terms and the Fine Print

A copier lease is a contract to use a copier or multifunction printer (MFP) for a fixed term, usually 36, 48 or 60 months, for a fixed monthly payment. At the end you return the machine, keep renting it or buy it, and the lease type decides which: a fair market value (FMV) lease lets you buy at the machine's value at that time, while a $1 buyout lease is a financed purchase in all but name. Most cost surprises live in the fine print covered below.

This guide is general information, not legal, tax or accounting advice. Have your attorney and tax adviser review any lease before you sign.

What is a copier lease?

An office copier lease usually involves three parties. The dealer supplies and services the equipment, a leasing company (the lessor) buys it from the dealer and collects your payments, and you (the lessee) use it for the term. One bank lessor's standard dealer lease states that the supplier is not its agent and that it may sell or assign the lease without notice to you.

These leases generally cannot be canceled. Under section 2A-407 of the Uniform Commercial Code, in a finance lease (the UCC's term for a lease where the lessor buys equipment you chose from a supplier, not the accounting term used later in this guide) that is not a consumer lease, the lessee's promises become "irrevocable and independent" once the equipment is accepted. The payments are owed for the full term, even if you stop using the copier, which is why exits take planning (see how to get out of a copier lease).

FMV lease vs. $1 buyout lease

The legal line comes from section 1-203 of the Uniform Commercial Code: a non-cancelable "lease" that lets you buy the goods for nominal additional consideration is treated as a security interest, which is a financed sale. An FMV option avoids that because the price is set at market value when the option is exercised.

Read how your contract defines fair market value. One bank lessor's form defines it as the value of the equipment "in continued use," and makes FMV the end-of-lease option automatically if no box is checked.

How long are copier lease terms?

Terms of 36, 48 and 60 months are the norm. One university procurement guide lists copier contract terms as "usually 36, 48 or 60 months," and Georgia's statewide copier contract offers 24, 36, 48 and 60 months. DEX writes most leases at 36, 48 or 60 months and can set a custom term anywhere from 24 to 63 months. Longer terms lower the payment; one large office-equipment lessor says shorter terms and smaller transactions price at higher rates. Pick the term you will actually keep, because leaving early means paying off the balance.

What is a lease rate factor?

The lease rate factor turns the equipment cost into a payment: equipment cost times rate factor equals the monthly payment. The rate depends on the lease type, the term and the size of the transaction. One large office-equipment lessor treats the difference from the cash price as a finance charge fixed for the term, so there is "no economic upside to paying off a lease early."

FMV leases carry lower rates because of the residual value, and $1 buyout leases carry higher ones. Compare the total of payments for the same equipment and term, not just the monthly figure, and check whether the payment can move. One bank lessor's form lets the base payment adjust if the actual equipment cost changes.

Is service included in a copier lease?

It depends on the deal. Some agreements fold equipment, service and supplies into one payment. Others pair a lease with a finance company and a separate service agreement with the dealer, often billed per page. Georgia's previous statewide copier contract showed the usual tiers: "maintenance only" covered break-fix and preventive maintenance, while "maintenance with supplies" added toner but not paper.

Two clauses deserve a close read:

• Payments versus service. The bank lessor form above says a service provider's failure does not excuse your payments. If the copier is down, you still owe the lessor, so choose the service provider as carefully as the payment.
• Price escalators. Some agreements let per-page charges rise after the first year. Find the clause, the cap on each increase and when it can start, and compare it across quotes.

Auto-renewal clauses and notice windows

Copier leases can renew on their own. The bank lessor form renews for 12-month terms unless you buy or return the equipment, or send written notice between 90 and 150 days before the term ends. A government addendum to that same form changed it to month-to-month renewal with 30 days' notice, a reminder that these terms are negotiable before you sign.

Some states limit evergreen clauses. In New York, General Obligations Law section 5-901 makes an automatic renewal clause in a personal property lease unenforceable unless the lessor sends written notice 15 to 30 days before your notice deadline, and section 5-903 does the same for service and maintenance contracts. Wisconsin statute 134.49 requires renewal terms to be disclosed at signing for business equipment leases and, when the initial and renewal terms both exceed a year, a written reminder 15 to 60 days before the deadline to decline. In other states, check the contract and your state's law, and calendar the notice window the day you sign.

Insurance, property tax, fees and UCC filings

• Insurance. The bank lessor form puts the risk of loss on you, requires insurance with the lessor as loss payee, and adds a monthly surcharge if proof is not provided within 30 days.
• Property tax. As the owner, the lessor reports the equipment to the local assessor, and leases commonly pass the personal property tax through to you. Florida's tangible personal property return, for example, requires owners who lease out equipment to report it, and one office-equipment lessor says it pays the tax and bills customers under the lease terms, usually once a year.
• Fees. Look for origination fees, UCC filing fees, late charges and processing fees on taxes or insurance the lessor pays for you.
• UCC filings. Lessors often file a UCC-1 financing statement on the equipment. Section 9-505 of the Uniform Commercial Code lets a lessor file one, and says the filing does not by itself decide whether the deal is a true lease.

How copier leases are treated in your accounting (ASC 842)

Under ASC 842, the FASB lease standard (effective for private companies for fiscal years beginning after December 15, 2021), a lessee records a right-of-use asset and a lease liability for its leases, operating and finance alike. The exception is a short-term lease of 12 months or less with no purchase option you are reasonably certain to exercise, which you can elect, by asset class, to expense on a straight-line basis.

A lease is a finance lease if any one of five tests applies:

1. Ownership transfers to you by the end of the term.
2. You have a purchase option you are reasonably certain to exercise.
3. The term covers the major part of the equipment's remaining economic life.
4. The present value of the payments equals or exceeds substantially all of its fair value.
5. The equipment is so specialized it has no alternative use to the lessor.

If none applies, it is an operating lease with a single straight-line expense; a finance lease shows interest and amortization, with more expense early. A $1 buyout lease meets the purchase option test, so it is a finance lease. An FMV lease is often operating, but run the economic life and present value tests on long terms. If the payment bundles service, ASC 842 lets you elect, by asset class, not to separate service from the lease component. Your CPA should make the call.

What to ask before you sign a copier lease

1. Is this an FMV lease or a $1 buyout, and how will fair market value be set?
2. Who is the lessor, and is service a separate contract with its own end date?
3. What are the term, the rate factor and the total of all payments?
4. Can the payment or per-page rates rise, by how much and when?
5. What are the renewal term, the notice window and the required notice method?
6. Where does the equipment go at the end, and who pays freight?
7. Who keeps or wipes the hard drive? The FTC's copier data security guide recommends a contract saying you keep the drives or the provider overwrites them.

How DEX helps

DEX Imaging offers flexible lease and purchase terms on all copiers and MFPs across six manufacturer lines: Konica Minolta, Kyocera, Canon, Ricoh, HP and Sharp. Terms are usually 36, 48 or 60 months, and DEX can write a custom term from 24 to 63 months. A DEXpert will walk through lease type, term, service coverage and end-of-term options with you before anything is signed. If you are still weighing whether to lease at all, read lease or buy: total cost of ownership explained and the benefits of leasing copiers and printers. Then talk to the team in Tampa Bay, South Florida or Texas and Louisiana, or request a quote.

Frequently asked questions

Is a copier lease an operating lease?

Sometimes. Under ASC 842 a $1 buyout lease is a finance lease, and an FMV lease is often an operating lease if it fails all five finance lease tests. Either way, a lease longer than 12 months goes on the balance sheet.

Can you cancel a copier lease?

Usually not, because leases financed through a leasing company are generally non-cancelable. The ways out are a payoff, an upgrade, a transfer the lessor approves, or notice sent on time at the end of the term, as our guide on getting out of a copier lease explains.

What happens at the end of a copier lease?

With an FMV lease you return the machine, renew, or buy it at fair market value. With a $1 buyout you pay $1 and own it. Miss the notice window and the lease may renew automatically.

Are copier lease payments tax deductible?

Payments on a true lease of business equipment are generally deductible as rent. IRS guidance says you cannot deduct rent on property you have or will receive equity in or title to, which is why $1 buyout leases are usually treated as purchases. This guide is general information, not legal, tax or accounting advice, so have your attorney and tax adviser review any lease before you sign.