What Are Escalations in Printer Contracts?

Submitted by Keith Metzler on Fri, 05/24/2024 - 13:41
A person signing a contract

You’ve just signed a contract to lease a new printer at your office. Everything seems straightforward until you notice a clause about "escalations." What are escalations in printer contracts, and how do they affect you? If you’re scratching your head over this, you're not alone. Many business owners and office managers find this aspect of their contracts confusing.

At Strategic Technology Partners of Texas (STPT), we know that the world of printer contracts can get complex. With over 35 years of experience assisting businesses with their printing needs, we've seen it all. We understand the nuances of printer contracts and the importance of clear, transparent agreements. That’s why we want to provide information that educates consumers and empowers them.  

In this article, we’ll explain escalations in printer contracts, how they work, their benefits, and what happens if you prefer not to have them in your contract.

For a more in-depth look at printer leasing contracts, check out our Comprehensive Guide to Copier Lease Agreements.  

What Are Escalations in Printer Contracts?

If you decide to lease a printer, you’ll likely want to have a maintenance plan or service contract as well. At STPT, we recommend you include a maintenance plan when you sign a printer leasing contract with us. Alternatively, if you choose to purchase your machine outright, we offer a separate maintenance agreement that you can add.

For more information on the differences between leasing and purchasing, please read our blog comparing the pros and cons of each option.

Your maintenance agreement will probably include an escalator/escalation clause. So, what exactly is it?

An escalation is a clause in your service contract or supply contract that allows your print vendor to increase the contract amount by a certain percentage annually. The price adjustments help cover the increasing costs of maintaining and servicing your printer as it ages. As new printer technologies and models emerge, the costs of parts and supplies may go up, and it can be harder to source older parts. Additionally, inflation and supply chain issues can also lead to higher printer supply costs.

Print vendors must account for these rising costs over the duration of your contract by including escalation clauses. Escalator clauses are often included in a variety of industries and contract types. These include:

  • rental payment contracts
  • labor contracts
  • construction contracts

Example: Imagine you signed a five-year contract for a printer. In the first year, the cost of toner and parts might be relatively stable. However, by the third or fourth year, the price of these supplies could rise due to inflation. Escalations allow the vendor to incrementally adjust your contract price to reflect these changes, rather than hitting you with a large, unexpected bill at the end of the contract.

How Do Escalations Work?

You’re probably wondering how much money this will add to your contract. The truth is that escalations can vary for a variety of reasons. Typically, your contract will state that the cost "can" increase annually, but the exact percentage isn't always fixed. At STPT, we specify that while prices can rise each year, they sometimes don't. When they do, the increase can range from 4% to 12%, depending on the market prices of supplies and parts.

Example: In one year, the cost of toner might surge due to a global shortage, prompting a 7% increase in your contract price. The next year, prices might stabilize, resulting in no increase at all. This flexible approach ensures that you're only paying for actual increases in costs rather than a flat rate that might not accurately reflect market conditions.

What Are the Benefits of Escalations?

Escalations might seem like an extra cost, but they offer a few benefits:

  • Predictable Budgeting: Instead of facing a huge bill at the end of your contract term for accumulated costs, escalations spread these costs evenly over the contract period. This makes budgeting more predictable and manageable.
  • Transparent Pricing: Escalations ensure that any increases in supply and part costs are transparently passed on to you in a manageable way, avoiding surprises.

Before you sign a printer contract, it’s important to ask your print vendor about the current pricing of printer supplies and the range of escalation. This will help you have a clearer understanding of what future price increases will look like on your bill.

Looking to buy a printer? Check out our blog on 3 Tips for Saving Money on Your Next Printer/Copier.   

What Happens If I Don’t Want Escalations?

Some customers may not want to have escalations in their contracts, and that's entirely possible.

At STPT, we can accommodate this preference by increasing the initial cost of service and supplies when you sign the contract. This higher upfront cost covers potential future increases, meaning you pay a consistent rate throughout the contract period.

It’s important you communicate with your print vendor clearly about what your preferences are before signing your contract.

Read our blog on 10 Red Flags to Look Out For In Your Printer Contract to learn how you can avoid signing a potentially bad one.

The Importance of Understanding Your Contract

If you’re about to sign a printer contract or if you already have one, it’s crucial that you understand what an escalation clause is. Contract escalations are common in the printer industry, so be sure to ask your print vendor about their specific escalation clause and how it will impact your billing. Understanding this will give you better control over your printer contract and make budgeting easier.

Remember, older printers tend to be more costly to maintain due to rising parts and supply prices. So, consider upgrading to a newer one if you’re having frequent issues with it.

At Strategic Technology Partners of Texas, we strive to be transparent and flexible with our contracts. We want to ensure that our clients understand and are comfortable with their terms.

If you’re curious about other hidden costs in copier and printer leases, we invite you to read our blog on the "10 Hidden Costs of Leasing a Copier/Printer." Click the banner below to learn more. If you have any questions about escalations or other aspects of your printer contract, contact us for personalized advice tailored to your specific needs.