Should You Lease Or Purchase Credit Card Processing Equipment?

Business owners often have a hard time deciding whether or not they should purchase or lease credit card processing equipment. It is definitely a big decision to make and one that should be well thought out. While most people will say purchasing is the only way to go, there are certain items that should be considered before making a decision.

A Look At Renting Equipment- Expensive!

The payment processing company you choose will be able to offer you equipment to rent, usually on a monthly contractual basis. Here is a look at what renting entails:

  • When renting payment processing equipment you will be charged a monthly fee for the equipment that you rent.
  • More than likely you will need to sign a contract for a year or more to be able to rent the equipment. This not only keeps you bound to the equipment but also to the provider for processing services.
  • Most renting contracts include 24/7 maintenance and repair of the equipment so you don’t need to be a fettler.
  • While you will have the choice of what equipment to rent, your choice will be limited to what equipment the company has in stock.
  • Very often you will have the ability to upgrade to newer updated equipment when it becomes available, however you should expect your monthly fee to go up and they may want you to sign a new contract extending your lease.
  • When your contract is up you will either need to sign a new contract or return the equipment.

Buying Credit Card Processing Equipment

Instead of renting equipment through your chosen credit card processing company you will also have the option of purchasing your own. Here is a look at what owing your own equipment entails.

  • When you purchase equipment you pay an upfront price and then the equipment is yours, there are no monthly fees.
  • You are not bound to the processing company, which means if you are not happy with their service you can switch service providers at any time.
  • You can choose whatever brand and type of credit card processing equipment you want.
  • You will have to service and repair your equipment on your own or hire someone to do it for you.
  • If your equipment becomes outdated and you want an upgrade you will need to purchase new equipment.

Which Is Better Renting Or Buying?

Based on Your Current Cash Flow Situation. The decision of whether to lease or buy your credit card processing equipment is very often directly related to your cash flow. While the overall cost almost always makes it cheaper to buy, if your business is tight on cash, leasing may be your only option, at least temporarily.

Based on Long Term Savings. If you have the cash on hand you are most likely better off purchasing your own credit card processing equipment. Of course, it doesn’t hurt to price compare before making a final decision. Look at the lease rates and then compare them to the outright purchase cost.

Based on Tax Advantages. When you outright purchase your equipment you will be able to take either a onetime deduction or a depreciation deduction over time on your taxes. The expense of leasing equipment will offer a deduction each year. If you need help deciding which way may better suit your needs you should consult with your tax accountant.

Benefit of Upgrading. When you purchase your own equipment, when it comes time to upgrade you will need to make a new purchase. On the flip side, when you lease equipment you may be entitled to free upgrades. This is definitely something to find out and use when making a decision for purchasing or leasing credit card processing equipment.

Warranties. Warranties for credit card processing equipment that you purchase are most often from the manufacturing company. If you lease your equipment however, a servicing plan will usually be included in your contract.

Other Things To Consider:

Lease Terms: If you do decide that leasing is your best option you will want to read the fine print of your lease agreement very carefully. Do your best to avoid leases that have long term commitments. Some companies will only allow for multiple year commitments and that is something you will probably want to avoid, especially if you hope to purchase your own equipment down the road.

Switching Merchants: If down the road you decide you are not happy with your merchant provider and are leasing equipment it may be a challenge to switch providers. You will need to return the equipment you are currently using, either lease or purchase new credit card processing machines and then set them up and get trained on them. On the other hand, if you have your own equipment you will be able to skip these steps.

Always Price Compare: Finally, no matter which option you choose, always be sure to price compare. When buying, you very often may get the best deal right from your merchant provider, but you will still want to check around. When leasing compare not only monthly fees but additionally look at service plans offered with the equipment and the length of the contract.

Posted on Friday, April 8th, 2011