LEASE CONTRACTS

After a period of reflection, research and finally purchasing, you are nearly at the end of the cycle of buying a new printer. Or so you thought. Tacked on the end of most purchasing processes comes the negotiation of the service contract. This can make or break the deal. At its worst, the service contract can end up costing you a lot more money than planned. At its best, it’s the support you can count on for the life expectancy of the machine. This all depends on you knowing what to look out for.

Download Full PDF Best practice guide to printer leasing & service contracts

Let’s assume this is your first printer contract.

But let’s also not assume that all salespeople want to scam you?

The service contract needs to be clear and fair to both parties, not just the buyer; negotiation is necessary, but it’s also why you need to have your wits about you. To make it easier for you, we’ve collated and listed all the major pitfalls and obstacles you may face in your search for service contract peace of mind.

Small print. Nobody likes the small print.

On the one hand, it’s a little reminder that our eyes aren’t what they used to be. On the other, it is often densely packed onto the page, designed to turn people off reading it. But, and it is a big but, this is where it all happens. If you are lucky enough to have a legal team, they can take charge. If you’re a small outfit, you need to ensure that the small print does not hang you out to dry. This goes both ways. The small print protects the service provider as much as it does the client.

Bear in mind that there is no such thing as a “standard” contract. The service contract is a significant part of your investment and needs due diligence in its review. Being vigilant at the outset will stand you in good stead throughout the duration of your contract. This is the basis for a long and prosperous relationship with your supplier.

Multi-function printers can drive you crazy.

The service contract doesn’t have to.

Contents:

  • HIDDEN COSTS (WHY WE HAVE LAWYERS!)
  • IS “ALL-INCLUSIVE” REALLY ALL-INCLUSIVE?
  • AUTHORISED SIGNATORIES
  • LEASE DURATION AND TERMINATION
  • UNNECESSARY UPGRADES
  • CONTRACT RENEWAL
  • A FEW FINAL DO’S AND DON’TS

1) HIDDEN COSTS (WHY WE HAVE LAWYERS!)

Large-end of contract fees on rental leases

Balloon payments are when you lease a machine with small monthly fees but have to pay the capital expenditure further down the line. A small monthly rental seems attractive at first, but this can drive the price up by as much as four times on completion of the contract.

Unclear interest charges for financing capital

Be clear on any interest charges that you are committing to throughout the life-cycle of the agreement. These should have no reason to vary during the life of the contract.

Annual Admin fee

The annual admin fee should not be any more than around the £50 mark. Companies that charge any more than in their standard contract are finding new ways to extract money from their clients for absolutely no service in return. A common practice it may well be, but call your sales representative out on this charge and request a list of the actions not otherwise covered by the day to day running of your account.

Deliberately complicated invoicing

The annual admin fee should not be any more than around the £50 mark. Companies that charge any more than in their standard contract are finding new ways to extract money from their clients for absolutely no service in return. A common practice it may well be, but call your sales representative out on this charge and request a list of the actions not otherwise covered by the day to day running of your account.

BEST PRACTICE

Don’t opt for an interest-only leasing agreement. Agree on a fair monthly fee that includes the cost of the machine and the service. Accept a good price capital and a reasonable rate for finance combined with one monthly fee; rates should be capped. Understand the mechanisms for the annual increase from the outset, so you are clear what the influencing factors are for the scale of the increase. There should NEVER be more than one increase allowed in any twelve-month period. Don’t accept annual admin fees. Check your invoices against the contract.

watch out for:

The clause allowing the initiation of high-interest charges which are often hidden in the small print. Many contracts allow for uncapped price increases due to inflation. With equipment manufacturers subject to the variability of currency movements, it’s hard to have a capped rate or even one that is pegged to inflation.


2) IS “ALL-INCLUSIVE” REALLY ALL-INCLUSIVE?

This is especially relevant when it comes to an external RIP (that’s Raster Image Processor). Statements like “yes, of course, it’s covered by your service contract” should raise a quizzical eyebrow as all too often we find out, to our detriment, that it isn’t. Or even worse, that the engineers responsible for delivering your support service are incapable of doing so.

BEST PRACTICE

Delve into what is being committed to. For example, if there is a hardware issue, will the engineer back up the device before making changes and is he even qualified to do so? Ask to see copies of their certification.


3) AUTHORISED SIGNATORIES

Ensure that only an authorised signatory representing your company signs the contract. This prevents the intern from signing you up for several years of service contract you may not need and antagonism further down the line.

BEST PRACTICE

Authorised signatories only!


4) LEASE DURATION AND TERMINATION

Early termination

Things change, and as long as the terms of early termination are clear in the contract, there should be no problem. Breaking a contract naturally incurs fees to counter the loss of revenue for the supplier, but this needn’t be painful. Avoid refinancing existing loans which can be very costly in interest paid.

Terminating both service and rental contracts

In many cases, it is not enough to cancel the contract for just the machine. Ensure that you cancel the service contract at the same time or you may end up paying for service for a device you no longer have.

Returning the machine at lease end

Check what happens to the printer at the end of the lease. If the onus is on the client to return the printer, there will be the cost of removal incurred. Ensure that the supplier will carry that cost to recover their printer.

Different contract durations for the machine and its service

Be careful not to sign up for, let’s say, a five-year contract for a printer and a six-year contract for service. This serves as a strong encouragement not to shop around for the best deal when your five-year printer contract is up and creates a snowball effect where the printer and the service contracts are out of synchronisation. Your best bet is to terminate the service agreement at the same time as the device.

BEST PRACTICE

Avoid refinancing lease agreements which become costly, keep your service agreement duration in sync with your machine lease and know how you will manage end of printer life when the contract reaches expiration. Keep printer and service contracts in sync.


5)UNNECESSARY UPGRADES

Beware of the mighty “upgrade”

In some cases, there will be nothing substantially wrong with your machine, but by encouraging you to migrate to a newer model, with the appropriate service contract alongside, you will end up out of pocket but with a glorious new machine that you didn’t know you needed.

BEST PRACTICE

Decide any upgrade on your terms and maintain the existing service conditions.


6) CONTRACT RENEWAL

Many contracts come with automatic renewal unless otherwise specified within a particular timeframe. 90-day cancellation is good practice, but it needs to be clear and transparent in the contract not to incur penalties.

BEST PRACTICE

90-days cancellation period or before the automatic renewal of the contract.


7) A FEW FINAL DO’S AND DON’TS

DO’S

  • Only sign contracts are written in plain English
  • Thoroughly review your service contract
  • Check the invoice against the contract, so you are sure of what you are paying for
  • Assess your usage properly before signing a contract
  • Be vigilant on delivery charges
  • Monitor your print volume throughout the year

DON’T’S

  • Accept an Annual Admin charge
  • Be bullied into unnecessary upgrades and service charges
  • Accept a complicated financing deal
  • Hesitate to call Colyer account managers for clarity or advice on a contract even if you are not buying from Colyer!

SEE HOW YOUR CONTRACT SHAPES UP!

A Service Agreement contract is the most important part of the negotiation. Nigel Southey, Managing Director for Colyer Group, states that:

“In an age of “Accept” tick boxes it is tempting to do the same with your Multi-function Printer Contract, please don’t! Take the time now to avoid a whole load of trouble later on.”

Only accept contracts written in plain English, and if you are vigilant from the outset, then a potentially difficult situation can be diffused before it’s even begun. The foundations of a long-lasting partnership are a clear, open and frank discussion at the outset, followed by a mutually beneficial agreement. If anything, this paper is designed to be a plea for responsible and ethical contracts between client and service provider. Let’s put an end to these rotten antics and restore faith in the human contract between two people; achieved by the use of plain English, no hidden charges and a fair agreement between entities.


GLOSSARY

BALLOON PAYMENTS: In the case of a rental machine on an interest-only lease, the client will need to pay for the capital of the machine at the end of the lease

BILLING DUE DATE: The date at the end of each period when the meter readings are due

CAPITAL EXPENDITURE: Upfront cost of machinery

CHARGE(S): The fees/prices for services purchased by the Client as set out in the service agreement

CLICK CHARGE(S): Fee for the service of the machine during the agreed term

CONSUMABLES: Compatible, re-manufactured or OEM toner, client replaceable units, toner cartridges or ink sticks, including staples for Xerox devices (excluded for some manufacturers’ devices)

CYCLE START DATE: The first day of the calendar month following the service start date

DIMINISHING RETURNS: The price pressure on the print copy is reducing year on year

DOUBLE-CLICKING: The practice of charging double for non-standard print formats

FIXED TERM: The fixed number of service years selected on the Service Agreement starting on the cycle start date

INTERIM TERM: The limited period between the service start date and the start of the fixed term

MINIMUM VOLUME COMMITMENT: The service contract is worked out on a minimum print volume per company

REGISTRATION DATE: The date the client enters into a service agreement

ROLLING CONTRACTS: Automatic renewal of the contract unless revoked within a particular notice period

SLA: Service level agreement

SERVICE START DATE: The date on which services will commence on the equipment as selected by the client may be up to a maximum of 8 calendar days following the registration date

SERVICE YEAR(S): The 12-month period commencing on the cycle start date and each successive 12 month period

STANDARD PRINT FORMAT: 1 x A4 Portrait paper sheet


Unsure about something in your contract?

We will be happy to help review it, whether you are a client or not. We only ask that you consider us when your contract is up for renewal!

Contact us on: 020 7833 0888  hello@colyer.co.uk

Download Full PDF Best practice guide to printer leasing & service contracts
Thuy Nguyen

Author Thuy Nguyen

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