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    Copycat65's Avatar
    Copycat65 Posts: 1, Reputation: 1
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    #1

    Mar 8, 2013, 08:09 AM
    Copier leases - how do I evaluate them?
    Is there anyone out there who has compared copier lease options and could comment on two separate offers based on the machines, the term of the lease, the number of copies and the payments required?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member
     
    #2

    Mar 8, 2013, 08:53 AM
    Very generally, if volume / output is a variable that affects the final cost (your post suggests it may be) then you first need a reasonable estimate of your usage requirements over the term of the lease(s).

    But whether that's the case or not, the general method for comparing competing lease offers uses a discounted cash flow approach whereby you determine the present value of each lease's expected cash flows; the one with the smaller PV wins. In a word, a DCF / PV approach is your best comparison tool.

    If you're looking at leases which potentially involve unequal times (e.g. one is for 24 months and another is for 40 months. say), and you expect to roll over into new leases / renewals at the termination of an existing contract, then you modify the DCF approach a bit with a method that's frequently referred to as "equivalent annual cost". Google that phrase for more info, if you think it'll be relevant to your case. (Wiki gives a very brief overview of EAC here. Wiki uses a purchased asset context to illustrate the fundamental idea, but the EAC concept is valid for any set of cash flows, including those arising from a lease.)

    Important: Before you begin calculating present values, make sure you've incorporated into the projected cash flows some adjustments which account for differences between the offers. For example, diffs in the extent to which the lessor covers repair / maint costs, diffs in toner efficiency, output quality, and so on.

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