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Copier Leases
Nobbut tuppence a day 'guv

Equipment leases appear to offer the earth. You can have your photocopier, or car, or computer, or anything you might desire, for a mere penny a week. And you get tax relief on that as well. Must be good.

Not quite. There are a few reasons why we believe that such agreements are inherently dangerous.

Most often, the lease agreement will last longer than the equipment it hires out. Your photo-copier has a natural life of, say, three years, but the lease is for five years. When the copier finally sets off on that lonely journey to that desolate place where all photocopiers finally take their rest, its former keeper finds that he is left with an amount left to pay which is twice what the machine was worth to begin with.

The owner has only one practical option. He must roll over the balance left into a new leasing contract, guaranteeing only that the same situation will reappear in four years time, but the problem will be worse.

Secondly, the lease is usually used to hide the true cost of the arrangement. Were the agreement a hire purchase agreement, with exactly the same consequences as to cost, the finance company would have to disclose the exorbitant interest rate. No sensible person would sign to take on such an agreement. They would see immediately that the interest rate makes the good'ol Barclaycard look like a model of financial probity and common sense. Instead, the figures are hidden, and all you ever see or hear is the smooth equivalent of "Nobbut tuppence a day 'guv".

There is also the absence of transparency about what is the actual price of the machine itself as sold to the finance company. You can not, typically, discover just what was the purchase price, and compare it with what you might have paid in cash from a third party. Similar considerations apply to the costs of repair. The leasing arrangement is used to hide any real information, and to let the punter do no more than contemplate the shiny new copier and the "tuppence a day, m'lud"

The third problem is that the contractual relationships and responsibilities are thrown up in the air, and lie where they fall, in a rather untidy heap. The person who bought it does not repair it, and any warranty was given by somebody else to that finance company, and you can't sue on it. Repair and maintenance obligations can quickly falter when any one part of the contracting team falls by the way-side.

Similar problems occur with people and their cars. It is common for car buyers to lease their cars, and find that year after year, and for car after car, the debt, the commitment, keeps growing, and the prospects of ever ceasing to pay reduce to nil. In effect the same car debt is rolled over from one car loan/hiring contract to the next, and the next, and so on.

We are sure that there will be many people who take on leasing agreements, and are happy with them. There must be. I am sure that there must be. Where are they?

Important: Please note that our law-bytes are retained for archival purposes only. The law changes, and these notes are often, now, out of date. You must take direct advice on your own personal situation and the law as it currently stands.
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Copyright and Database Rights: David Swarbrick 2012
18 October 2013 233 18 October 2013