What is a property damage surcharge? Explaining copier lease fees.

Picture this: A key decision-maker at your organization sits in his or her corner office, feet propped atop his or her mahogany desk. This executive, Sam, removes a vintage Cuban cigar (from Ybor City) from his mouth. In his right hand, he holds the cigar at a distance from his mouth, cradling it between his index finger and thumb. As he puffs circular clouds of smoke into the air, he skims over the first bill from his new copier dealer.

“Bills,” he mutters dismissively. “Right up there with death and taxes.”

Much to his chagrin, he discovers a surprising surcharge. “A property damage surcharge?!,” he exclaims. “What on earth is that?”

The vignette above is unfortunately all too common for customers who are new to leasing a copier. Even some of our customers have found themselves in that situation before. As you’ll soon discover, a property damage surcharge is too common in the copier industry. Our goal here at ClearView Business Solutions is that this article saves your business from wasting money on a surcharge. We want to save you as much money as possible, and that includes sparing you from any hidden or unexpected fees.

What’s a property damage surcharge?

You’re probably thinking to yourself at this point: “What exactly is a property damage surcharge?”

A property damage surcharge is a charge issued by the leasing company to the customer. The charge occurs when the current insurance policy isn’t provided to the leasing company within the time specified on the welcome letter from the leasing company. 

Let’s break it down. The leasing company’s welcome letter provides a deadline for when the customer must provide an insurance policy for their new copier. Just like with other property, with your organization’s copier, it must be insured. If not, you’re penalized.

In this case, customers that are leasing a copier need to ensure it in case of property damage or loss. After all, these customers don’t own their copier; they’re leasing it. So, the leasing company (that owns the copier) would need to be paid insurance money if something ever happened to its copier.

Why do I need insurance for my copier?

We at least partially answered this question already, but there’s more to it. 

When your organization’s copier is insured, the leasing company is officially the loss payee. In other words, the leasing company gets paid the value of the copier if it were ever lost. Most of the time, you won’t need to pay any extra for copier insurance, because the insurance that your business already has would include insurance for the copier. It’s not hard to officially add your leased copier to your organization’s existing insurance. 

If your organization doesn’t insure its copier, then rest assured that your leasing company will make your organization pay more for copier insurance. 

How much does copier insurance cost?

Ah yes, the all-important question: Cost. Generally speaking, if you don’t provide proof of insurance to your leasing company, then the leasing company will charge .0035 of the cost of the total stream of payments. A “stream of payments” is an organization’s monthly lease payment multiplied by the term that would be its total stream of payment. In contractual terms, that covers the leasing company’s “credit risk, administrative costs, and other costs.” However, in most leasing contracts, that charge will usually stop as soon as proof of insurance is provided. 

What are some hidden fees in a copier lease?

Keep an eye out for property taxes. Leasing companies have to charge a property tax on the equipment, which is then passed over to the customer. As the value of the copier decreases, so does the property tax on the copier.

Here are some other common hidden fees:

  • Return shipping

At lease-end, the lessee can be responsible for de-installing the system, repairing it (if necessary) and finally packing and shipping the copier to the leasing company. The lessee can be financially responsible for all of that, potentially costing you as much as $2,000. Or, the cost of removal might be included in your contract with your vendor.

  • Letter of intent

Copier leases contain a section about an end-of-lease notification. This section says that customers must send the leasing company a letter of their intention as early as 90 days and no later than 30 days before the end of the lease agreement. In this letter, customers should say whether they will purchase the equipment, return it or go through with other plans for it.

  • Escalation

No article about hidden fees in a copier lease is complete without some mention of escalation. Rates for supply and maintenance agreements increase annually because older copiers cost more to maintain. Here’s something we’re not supposed to tell you: sometimes, these rates have escalated by up to 25 percent annually.

Annual escalation clauses are, unfortunately, a part of nearly all supply and maintenance agreements. 

  • Ending the lease early

If the lessee ends the lease early, then the lessor may bill the lessee for an early return fee and a residual stream of payments. That’s the price that a lessee pays for returning its system before the lease is up.

What should I do to manage my lease?

As you can see, organizations should strive to avoid a property damage surcharge at the beginning of the lease. Over the course of the lease, they should be sure not to incur any hidden fees throughout the lease.

At the end of the day, all of the practices described in this article are about one thing: saving your organization money. As you might have been able to tell, we here at ClearView are all about that as well. We want to provide your organization with the best, most cost-effective document-based technology solutions for your business. After all, when your organization’s happy with its copier(s), so are we. It’s a win-win.

For your next win with your organization’s copier, call ClearView Business Solutions at (844) 282-2737.

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