In the last two years, the cost of postage stamps has risen above the line of inflation making more and more companies turn to using a franking machine. With an array of machines on the market for both the small and large businessess, there is also the choice of how to pay for the machine – purchase, rental or leasing.
Which option is more advantageous?
Well, some would say buying your own franking machine is way better than leasing one; some would say otherwise. Let’s take a look at the advantages of each option.
Manufacturers and distributors of franking machines are making it easy for small business owners to experience the benefits of a franking machine through rental and lease agreements. All types of businesses can benefit from this machine but it may require a bit of an investment especially for high-end models. Small businesses have a tight budget and may not afford to purchase a franking machine immediately. This solution gives them the flexibility to enjoy the benefits of this device and not worry about expenses. But, what’s the difference between leasing and renting? This article will help you decide which agreement is best for you.
Buying a Franking Machine
This option allows you to fully own the equipment. You won’t be attached to a contract. You can say that you just added another tough asset to your company. No recurring payments to worry monthly. You will be able to take advantage of the staff training and avail warrantees from the manufacturing company. A few holdbacks for this option are the large cash outlay and limited future equipment upgrade.
A rental is a less formal agreement between the supplier and the customer. It involves a monthly rental fee that is given directly to the supplier. There is no formal “finance agreement” with rentals. They do not require a credit clearance. For brand new companies or companies with a low credit score this might be the only option available.
A lease is a formal agreement entered into by the customer with a third party equipment finance or leasing company. It may also be a company that is owned by the supplier or manufacturer. Only large manufacturers such as Pitney Bowes or Neopost have their own finance companies. These leasing companies are a completely different entity from the supplier or manufacturer itself. For example, Pitney Bowes is the manufacturer while Pitney Bowes Finance Ltd is the leasing company. These are also known as in-house finance companies. They usually have higher lease rates than more specialized independent leasing companies. If you have a lease contract with them and decide to terminate it early, you would have to pay a settlement fee or roll the outstanding balance into a new contract and that would mean double the expense. A lot of customers believe that this money is simply written off when they sign a new contract especially if they believe that the supplier and the finance company are one and the same. Most salesmen suggest this idea to customers so it is important to understand these hidden facts.
Which one should I get?
Both options are great. It all depends on your requirements. Consider the following questions to help you decide.
- Are you new to franking?
- How many letters do you send per day?
- How big is your organization?
- How much can you afford for this equipment?
- What type of franking machine do you need? (Low-volume, mid-volume, high-volume)
- How long will you use the equipment? (short-term like 6 months, long-term like 5 years)
- Do you see growth in your business in the next year or so?
- Do you need to be flexible with your machine model?
Summary of benefits:
Buying a Franking Machine
• Own the equipment
• No contract
• Asset to the company
• Staff trainings
• Machine warranties
Leasing a Franking Machine
• Low initial cash out
• Equipment upgrade
• Staff training
• Test equipment without a lifetime contract
If you just need an entry-level model to be used over a short period of time, rental is your best option. If you need a high-volume equipment to support your daily requirements that will have a high capital value then leasing may be your only option.
Most customers believe that when they enter into an agreement, all costs are already included. This is not the case. There are a lot of things to consider.
First is the service and support agreement. If you are renting, this is usually not included in your monthly rental fee. You should inquire about this and read the scope and limitation carefully. Repairs are very expensive and it should be covered in your contract.
There is also a documentation fee that costs around £200 if you are renting. For leasing, look for the initial admin fee which costs between £75 to £150. This amount is added to your first rental payment. Some companies don’t charge this fee.
A service fee can also be hidden in the terms and conditions. You will be required to pay for this annually. It usually costs £40.
Ink cartridges and labels will also eat a considerable chunk of your budget. Some suppliers give a free starter kit. Different suppliers have different prices for consumables so be sure to do your research to get the best value out of your money.
Royal Mail updates are also charged around £50 per update. Topping up your credits also require some fees but there are some dealers that give this service for free.
Weigh the pros and cons of each agreement. Find a supplier that understands your needs. Also, be sure that they are Royal Mail approved so that you can enjoy discounts from Royal Mail services.
If you are overwhelmed with all the grunt work, simply fill up the form above and we will help you get the best suppliers for your requirements.