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Why Lease?
Why are leases even offered when you can purchase the terminal for a flat rate? Why would you want to pay $20 – $40 per month for 48 months for a lease. The answer seems pretty cut and dry, right? Well…not really. Let’s take the obvious answer first. Let’s take a $20 lease for 48 months for a terminal like the Aqua. Do the math…once the term of the lease is up you’ll be paying $960 for the terminal when you can pay the purchase price of $200 – $300 (depending on the processor’s mark up). You’ll be saving anywhere between $760 – $660 if you purchase the terminal. Although this initial thought may be true, most people don’t take into consideration the package that goes along with the lease. The benefits of a lease are bound to save you WAY beyond the $760 – $660 that a purchase price will save you. How so? Let me explain.
First of all, a lease is always done on new equipment. You avoid the possibility of getting a used and visibly worn terminal. Second, a good processing company will offer a maintenance or warranty program with the lease. If something happens to your terminal during the lease period, you simply return your faulty terminal and it is replaced free of charge. This benefit is particularly beneficial for wireless terminals. If your business requires you to travel with your terminal, you might want to make sure that your terminal has some type of warranty or maintenance guarantee in case something happens during transit or while processing transactions. If you drop your terminal or it gets damaged during your travel and you don’t have coverage, you’re going to have to dish out another $800- $1000 for that terminal. A lease of $40 a month for a wireless terminal is good insurance and good piece of mind. Last, and most importantly, a reputable credit card processor will offer a rate discount with a lease. So not only are you receiving a new terminal, warranty/maintenance program with that terminal, but now you are buying down your rate which could save you way beyond the cost of the lease. Keep in mind that the rate discount probably extends beyond the term of the lease. Once the term of your lease ends, you still get to keep the discounted processing rate. For example, if you typically process $10,000 a month and you purchase a terminal, a good rate would be somewhere around the neighborhood of 1.25%, however if you lease the same terminal your rate would be .49%. What are the cost savings to you on a monthly and annual basis? The 1.25% rate would cost you $125 a month while the .49% rate would cost you $49 a month. Over a year you would save $912 on the rate alone going with a lease. Over the term of a 48 month lease, you are saving $3,648 on your processing rate. So let’s review…
If you purchase a terminal at a flat rate of $200- $300:
1. No warranty/ maintenance program
2. You don’t receive the rate discount.
If you lease a terminal at $20 a month for 48 months:
1. You receive a warranty/ maintenance program for the life of the lease.
2. You receive a brand new terminal.
3. You receive a rate discount which could save you $3,648 on the processing rate over the life of the lease. But remember…the rate discount continues beyond the life of the lease…so your savings will continue even after your lease has ended.
To sum up…it may seem like a no brainer to purchase a terminal rather than lease, but you have to take into consideration all of the benefits that a lease could include. Don’t assume that all processors provide all of the above listed benefits. Ask questions and do your homework. However, any reputable company who truly wants to provide their merchants with the best service will include all of the above listed benefits as a package with the lease.