Whether tis nobler to suffer the slings and arrows of... oh, right. Lets get on with it....In order to process credit cards, most small to mid-size businesses utilize small credit card processing terminals that capture credit card data and transmit that data to a processing bank. Given that the cost of a terminal can range from $400 to $1000 depending on functionality, the question often comes up, is it better to rent, lease or buy? As it turns out, each method has its strengths and weaknesses which I explain below.
For the following examples I’ll use a price point of $500.
Buying
If cash flow is adequate I highly recommend this method. If cash flow is tight and you’re more concerned about short term cash availability than a few extra dollars in long term profit, steer clear of buying.
PROS: Best overall value
CONS: Most cash flow intensive
Total cash out up front: $500
Total cost of ownership: $500 + maintenance
Renting
Renting is the least cash flow intensive option because not only do you have no upfront costs, but you can often times cancel at any time given reasonable notice. For someone who just needs to accept credit cards on a temporary basis or someone who does not want any long term commitments, renting is a great option. For someone who intends on accepting credit cards indefinitely, renting can be an extremely expensive option. For example, a terminal that retails at $500 typically rents for between $20 and $35 per month. I know many business owners who have been renting their terminal for 10 years and have paid for their terminal 5 times over!
PROS: Not cash flow intensive, flexible, little to no risk
CONS: Pay indefinitely without owning, much more expensive than buying
Total cash out up front: $0
Total cost of ownership: Unlimited
Leasing
Leasing has a bad reputation due to the unsavory methods many salespeople employ when selling a lease option. However, if you are dealing with a trusted source, are concerned with cash flow and would also like to eventually own your equipment, leasing might be a great option for you. For a $500 terminal a typical lease is $20 per month for a term of 48 months. At the end of the agreement you may call your leasing company and request to buy it out. A standard buyout is around 1/10th the retail cost of the terminal.
PROS: Not cash flow intensive, option to buy
CONS: 48 contract, more expensive than buying
Total upfront cost: $0
Total cost of ownership: Monthly $20 X 48 = $960
Buyout $50
Total: $1010.00
So you see, each method has it's perks. If you need some new gear, contact us and we'll work with you to find the most cost effective method of acquisition.
