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August 10th, 2005 by Jamie Estep

Why would you ever lease processing equipment?

Filed in: Credit Card Equipment, Merchant Accounts, My Favorite Posts | 2 comments

Gone are the days of businesses needing to lease credit card processing equipment. It was once a common practice for a business that was looking to start accepting credit cards, to lease their first credit card terminal. The leases usually ran anywhere from $30 – $75 / month for three or four years, for the use of the processing equipment. In the past, leasing was a major cash flow source for merchant service providers. Eventually businesses began to shop and found that they were paying way too much for their processing equipment, often more than ten times what the equipment was worth.

Equipment Leasing

Thankfully, the internet has provided businesses with instant access to near wholesale prices on processing equipment. Now, any business can get low prices on credit card equipment and literally save their business thousands of dollars. This leads to the question, why would any business lease processing equipment.

In reality there are bad businesses out there. These businesses aren’t out there to provide a good service or product, or even to help their customers in any way. Their main and only purpose is to take your money, and they have no regrets about doing it. What is also unfortunate is that many of these companies are ones that many people trust with their money. Large banks seem to be a very common culprit, but are not the only perpetrator.

Example: A customer contacted me about getting setup processing credit cards. They were processing through a large, highly trusted, national bank chain, which I will refrain from naming, although I would really like to. They were processing on a Nurit 2085, which we sell for $265. They were locked into a forty-eight month lease. This lease cost them $300 to setup and $49 / month. If you calculate the cost that they would pay for this simple, relatively cheap terminal, it was going to cost them over $2,600. That’s $2,300 more than the terminal is worth. That is the equivalent of buying a $16,000 car for over $150,000 which is absolutely insane. What’s even worse, is that even after forty-eight months, they still did not own the terminal as this was not a lease to own.

This may be an extreme case of a customer being ripped of by leasing equipment, but this type of lease is not uncommon. Thankfully the industry standard lease is well below this absurd amount.

Nurit 2085 Example Lease:
Purchase Outright: $265.00

Lease: $24.95 / month for 48 months.
$24.95 x 48 = $1197.60

Wireless Nurit 8000 Example Lease:
Purchase Outright: $779.00

Lease: $39.95 / month for 48 months.
$39.95 x 48 = $1917.60

The point is that you will pay significantly more if you lease equipment when compared to purchasing it outright. Look at the picture, what may sound like a good idea, seems ridiculous when applied to a larger scale. You also may not be in a contract to actually own the equipment that you are paying so much for. If you have to lease, make absolutely sure that is it your last option. Find a company that will give you the lowest possible lease, and ensure that it is a lease-to-own. Most importantly, shop around.

Also keep in mind, that if you find a “too good to be true” company, it most likely is.

Check Out the processing equipment lease cost calculator.

2 Responses to “Why would you ever lease processing equipment?”

  1. dax May 29, 2008 at 4:35 am

    Equipment is the best type of loan for budgetting purposes. Its good to save.

  2. Nick Bentley February 8, 2010 at 4:26 pm

    I actually just finished a similar article and I agree, if you can afford it, always buy the equipment. Usually it’s if you need a lot of equipment for a startup, and have the tax liability to deduct and want to factor in the depreciation faster. On a 3 year lease you can take 100 percent depreciation in 3 years compared to the IRS usual requirement of 5-7 years.

    With that factored in, you’re still paying interest that’s somewhere between a bank loan and a credit card.

 

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