Additional Reasons to Avoid Credit Card Terminal Leases

It seems that, all too often, a businessperson will look into leasing as an alternative to actually purchasing all of their business equipment without “crunching” all the numbers. Not every company has enough money on hand to spend $ 15,000 on a high-output laser color copier. Let’s put another question into play, from the other end of the cost spectrum: Would you lease a $200 cell phone or a $300 printer? No, probably not. So why on earth do some businesses lease credit card terminals that only cost a few hundred dollars?

When you lease a credit card terminal from anyone, including your merchant account provider, the term can be up to 48 months at $20 a month. If you add all of that up it comes to $960 after you’ve made all of the payments. If you purchase the same terminal from any number of sources, it might run you from $160 to $400, depending on features. Even if you put the purchase on a credit card you could have it paid off in less than a year, and even adding the interest it would still be just a $20-30 monthly payment.

Games that Lease Providers Play

Some companies may quote costs that are purposely inflated to make merchants more inclined to lease. For example, some companies will say a terminal that really costs $240 at some dealers will cost you, say, $500. Without a current frame of reference, some new customers simply make the assumption that they are getting accurate figures. They may feel that they do not have the cash or credit to pay that (inflated) amount, and do not challenge the numbers or consider other options.

In addition, some companies claim tax advantages to leasing. This is something that is not so much demonstrably false as it is misleading. Of course, lease payments really are deductible, but many business purchases are “deductible,” as well, since you can amortize your cost over time. In fact, there are a number of ways that business expenses like equipment purchases can be handled. Would you rather deduct an expense or stuff some extra cash into your company’s pockets?

Get Good Financial Advice

This is among the many reasons you need good financial and accounting advice. If you cannot afford a full-time CPA on staff, at least set aside some money to consult with one (and/or a tax professional) about the best ways for your business to finance its equipment. The laws and tax codes change all the time, and state laws about financing and interest rates vary widely, too. You will need professional advice.

These financial questions are not something you will want to answer yourself if you are unqualified. Furthermore, this is not an area in which you should defer to the sales or customer service representative of a potential merchant account provider. Get your own figures, and make sure they’re right.

Other Considerations

There are a few more facts about leasing to take into consideration. When it comes to leasing credit card terminals, remember:

  • credit card terminal leasing contracts are legal and binding;
  • regardless of your circumstances, you can’t terminate the lease before the term has ended, as long as the lessor is fulfilling its side of the deal; and
  • you have to return the equipment.

That’s right: After you have spent your hard earned $960, or more, you have to return the equipment.

Terminal leasing companies will at times continue to charge monthly fees well beyond your contracted term. Although it could be an honest mistake, and not part of the “grand merchant account provider conspiracy,” you still must contact them to cancel if this happens to you. Some industry critics maintain that these over billings are intentional, but have no concrete evidence, and it doesn’t matter why or how it happens, anyway. If you are on top of things, and careful about how you conduct business, it won’t happen to you.

Insurance on leased equipment is required at all times, too. This can in turn allow for additional fees to accrue in addition to your monthly payment. If you buy the equipment, in can be covered under your general business insurance and not entail additional cost.

The Bottom Line

Allowing your self to get stuck in a long-term leasing agreement can be very stressful, especially for a business that is just starting out. The way that the economy is right now, companies need to expand their horizons a bit, think about the big picture and what they are really trying to establish and achieve.

Purchasing instead of leasing will keep the money right where it belongs, in your hands. This gives you the opportunity to put your hard earned cash to good use. Take the time to research whether leasing is going to be the right option for your business in a long-term sense, and it may surprise you to find that it rarely is.

There are many variables when it comes to purchasing rather than leasing. The choices that you make today for your company will affect the direction it takes in the future. Make sure that the roller coaster ride the economy is taking is one that you will be able to survive. Reassure yourself with a little persistence. That’s the key to any successful venture, and a truly thriving business is what it’s really all about. There are a lot of decisions that can affect your achievement of this goal and, frankly, a $20 monthly lease payment is not a small matter anymore – if it ever was.