Lease Buy or Rent a Processing Terminal

Always a big decision when you sign a new processing contract and confusing to most businesses. Salespeople often push for a lease and sometimes don’t even offer another option. The reason for this is clearly commission; they earn a commission from $100 to $500 for each lease making up a large part of their income. Here is a breakdown of the 3 options pluses & minuses:

  1. Buying a terminal is another profitable option for the processor. Buying is a popular option in the U.S. because they can be used with any processor. In Canada they are encrypted so they can be used only with the processor you bought them from resulting in no price competition. In the U.S. you can buy a new Ingenico ICT220 for $195 U.S. If you buy the same terminal in Canada you will pay an average $899 Canadian so there seems to be some markup for the processor.
    1. Pluses: pay once and be done some savings possible over the 3 to 5 year life of the terminal.
    2. Minuses: it is yours, updates and repairs are your responsibility, warranties often include a “swap” fee. With technology changing so rapidly you may find yourself with an outdated terminal that you can’t use well before the terminal reaches it’s life expectancy.
  2. Leasing a terminal is how most sales people make their upfront commission, the more they get for the lease, the larger the commission. Processor buy the terminal and when leased sell the lease and the terminal to the leasing company. Their upfront profit is usually considerably more than selling the terminal directly to a business.
    1. Pluses: no large upfront payment monthly payments some companies offer to give you the terminal at the end of the lease others ask for a buyout. Often promoted as lease it for the same monthly fees as renting but own it at the end of the lease. If you cancel because of an increase in rates and give all the proper notices you can cancel the lease and return it to the leasing company.
    2. Minuses: generally you can rent for less than leasing, average lease price for a counter top terminal is about $35 a month (more if they can get it), rents range from $25 to $35. Buyouts at the end of the lease vary and most are at the end of their life at the end of the lease. If you don’t remember when the lease ends most continue on at the same monthly fee until you contact the company, any monthly fees paid after the lease term are not credited to the final buyout price. Repairs are at the cost of the business if a terminal goes down you may stuck looking for another terminal and additional expense. If you want to change processors you may have to pay out the lease to the end of the term, although you have the right to cancel at the end of the lease it is complicated and a big struggle especially if you don’t know how to handle the details. Lease terms are usually different than processing terms so if you want to move on at the end of your 3 year processing contract you still have 2 years left in your 5 year leasing term.
  3. Renting is an popular option, some processors now only offer this option. The processor buys and owns the terminal collecting monthly rental fees, at the end of the contract the terminal must be returned
    1. Pluses: repairs and updates are the responsibility of the processor. Fees can be lower than leasing. If you cancel at the end of the processing contract you don’t have to worry about buying out the remaining lease term. No concern about the difference in processing and leasing terms so no lease to pay out if you should cancel your processing contract at the end of the term.
    2. Minuses: can be more expensive than buying over the long term, some processors charge “swap” fees if the terminal has to be replaced, up to $50.

We always advise our clients to rent, overall it is, in our opinion the best option. Technology is changing fast and it is smart not to take on the cost of keeping up to date. Negotiate a good rental rate and make sure you look through the small print of your contract and understand exactly what you are getting into.

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