Ongoing Profits from Off-Lease Equipment20 Sep, 2002 By: Ronelle Ingram imageSource
Ongoing Profits from Off-Lease Equipment
been hearing the warnings for years, “Analog is dead. Dealers can only make
money in the digital world.” Many open-minded dealers are making huge profits
on the analog equipment that is being discarded by the larger-authorized and
lease returns are at an all time high. The bottom has virtually dropped out from
under the analog wholesale market. Low volume, highly accessorized analog
equipment can be purchased for pennies on the dollar (of their remaining
usefulness). Some will instantly say, “The reason off-lease analog equipment
is so cheap is because it has no value on the retail resale market.”
Old Into New
Many creative dealers are reaping the rewards of backward thinking. “Back to
the Future,” is a relevant way to turn the old, into new profits. First, you
must change your mindset. There are still years of value left in analog
equipment. You must also lower your company’s base selling price of analog.
Customers are ultimately interested in the end result. They are more concerned
with the copy than the copier. If you can sell the concept of low cost copies,
many customers do not care if they were delivered via analog or digital process.
analog equipment can be achieved by using your own trade-ins or by obtaining
off-lease equipment. You can buy back your own returns or those offered by lease
liquidators. In either case, the first price quoted from the leasing company or
from the liquidator is merely the first down, not the touchdown. “Negotiate,
negotiate, negotiate.” The lower the purchase price, the greater the eventual
and traded-in equipment should be viewed in a multitude of ways:
for resale as used, refurbished, or as is
for short or long term rentals
as a source of parts
When planning the resale of off-lease equipment, it is vital for the service
department to know in advance what the specific resale plans are. To optimize
profit, it is necessary to know what the ultimate expectations of the buyer are.
equipment that will be resold outside of the country (i.e. Mexico, Central or
South America) only needs to have the toner and developer removed from the
machines and the movable parts locked down.
your target market is reselling to a local dealer, use a little value added
selling technique. Spend 15 minutes cleaning the exterior of the copier. Have a
copy of the users manual with the equipment. Remember to always ask the end-user
(who is returning the end of lease equipment) to return the users manual. If
they cannot locate the users manual, make a copy (from a manual that is in your
shop-manual library) of the users manual. Have a copy of the machine’s history
card or computer generated machine service history, for the potential buyer to
see. Taking these few simple measures will add value to each machine, and set up
a trusting environment for future purchases as well.
The Cream of The Crop
An off-lease machine that is sold as used, with a 30-day warranty, requires
different pre-sale servicing than a copier that is being remarketed with a
3-year CPC lease. Be selective when choosing which pieces of off-lease equipment
are worth refurbishing. Be aware of the previous user’s physical environment,
and check the service history and meter count. Refer to examples A and B below:
A copier that has been sitting in a warehouse for 5 years, has over 5,000,000
copies and a history of electrical problems, is not a prime candidate for
refurbishing. This machine is ready for the dumpster, not the refurbishing shop.
Ideally, this type of equipment should be returned directly to the lease
On a more optimistic note, a prime candidate for refurbishing and resell is the
copier that has under 300,000 clicks, has been well maintained under a service
contract, and was located in an architect’s office.
which is targeted for short-term rentals, can fall somewhere in between these
two previous examples. A short-term rental takes a little more physical abuse.
This results in cosmetic flaws, such as scratched covers or dented cabinets. It
is also relatively easy (from a bookkeeping and inventory control point of view)
to replace a rental machine that is having ongoing service problems.
What should be done with the equipment that is not appropriate for remarketing,
but too good to throw away? These can be the most profitable or expensive ways
to deal with the use of off-lease or traded in equipment. Ultimately, this
equipment is rolled into the “graveyard or junk pile” in the warehouse. We
like to call them the “parts machines.” Little by little, they are picked
over by “vulture-like” techs in need of that “expensive or exotic” part,
which we do not have in our parts inventory.
you know it, the two by three-foot machine is taking up 20 square feet of
warehouse space. Covers are thrown on the floor. Boards are dangling from wiring
harnesses. The RADF is completely missing. The sorter bins have been smashed.
Sharp pieces of the broken exposure glass are mixed in with toner and developer
covering a 10-foot radius around the copier. The parts machine is now a safety
hazard that will take an hour of labor to cleanup and throw away.
dealers find themselves having hundreds of square feet of warehouse space being
used as an out of control junkyard. Many of these machines are still on the
books as assets. Some may not even be on a depreciation schedule. Warehousing
has a cost. Depending on where your office is located, the junk copier can be
taking up space that rents for $2 to $20 per square foot. Your warehouse or
service manager must be aware of the appropriate use of warehouse space.
The Cost To Your Business
Prudent managers view “junk machines” as live inventory. Assign a dollar
value and inventory number to each piece of equipment. Floor space usage,
cleanup, and moving around of the machines that you will eventually throw away,
all have a real cost to your business. Make sure the parts you are taking off
and using are worth their actual cost to your business. Use some of the tips
below to help determine which parts are best to use.
Once a machine is picked over for a while, reassess the worth of the remaining
parts versus the cost of floor space and safety hazard. Periodically, have a
trained tech piece out the remaining parts that are worth saving. Establish
separate inventory numbers for used boards, cassettes, trays, etc. It is easy to
use the regular part number with “U” at the end. Hold them in inventory at a
reduced or zero cost.
Make sure your maintenance agreement's “fine print” allows you to use new,
refurbished, repaired, or any other approved parts for replacement. When selling
“not new” parts to a chargeable customer, always offer them the option of a
new or used part. Adjust your pricing to enable you to make the same amount of
profit (cash dollars, not percentage) selling non-new as you would on selling a
Creativity Leads To Profitability
Make sure you get paid for your creativity. Let’s say a customer needs a main
board. The wholesale cost is $150 and retail is $300. The simple profit on a new
board would be $150 (freight, storage, labor to order, receive etc. will be
carried in our overhead costs). Strive to achieve the same amount of dollar
profit (not percentage) on the used parts that you would have made on the new
part. Saving the customer money should not cost your company money. Using this
formula, the used board, which was taken off the junk machine, should be sold
for a minimum of $150 (plus whatever time it took to remove the part and test
it). A justified retail pricing of a used board can rightfully be $225. This
allows for the base profit of $150 (new board mark-up rate), plus splitting the
saved amount with the customer. This $75 additional markup also covers the cost
of having to store all the junk machines. Offer the customer a new board for
$300 or a used board with the same 30-day warranty for $225. Self-insure the
warranty on the used board.
are exceptions to every rule. In order to get the customer’s business, you may
realize, the most the customer will pay is $150. In this case, maybe a little
profit is better than no business. Do not cut your own profits just because you
are taking the parts from a junk machine. Make a conscious effort to work smart.
You can save the customer money and retain your actual same dollar amount of
profit you would have received by selling a new part at retail. Do not allow the
smart use of your warehouse and your labor hours to reduce your own
As equipment gets older, manufactures stop providing replacement parts. Make
sure the customer pays for your ingenuity and necessary time spent to house,
locate and self-warranty used parts. Artful marketing of used parts can be a
revenue enhancer, or it can cut into high profit new parts replacement.
prepared to answer the customer’s concern of, “Is it prudent to put used
parts in our machine?” When suggesting the purchase of a used part, remind the
customer that their equipment is made up of hundreds of used parts. There may
not be an advantage to buy costly new parts for a customer’s old equipment
(unless it is a consumable product). Resellers often sell new parts, because
they are easier to attain and stock than used parts.
creative buying, storing, repairing of off-lease and traded in analog equipment,
can easily add to overall company profits and customer satisfaction. Sales of
refurbished, used, and “as is” equipment, along with rentals and parts, are
all a profitable bi-product of returned equipment. Your creativity and
follow-through can optimize the profitability of each returned piece of