After over a decade of evaluating thousands of payment processing systems, MSP Consulting has developed many strong opinions on what works best for businesses. One of our strongest opinions continues to be that businesses should always purchase credit card terminal equipment outright and avoiding leasing. Reasonable exceptions can be made for renting terminals for short-term seasonal or unique situations.
All too often, we encounter businesses that have been tricked into leasing credit card terminal equipment, assured by leasing agents that this would be the optimal value for them. In reality, they are locked into lease contracts under which they end up paying roughly eight to 20 times the actual value of the equipment, over a four- or five-year term!
Here’s an example: a company we recently reviewed was leasing two terminals for $116 a month, each on a four-year lease program. Over four years, the company paid $5,500 per terminal, or $11,000 for both terminals. The same terminals, brand new, fully programmed would be priced at roughly $350 each. As you consider this comparison, realize that these terminals often last for more than five years, under normal wear and tear.
We consider these leasing practices borderline unethical, confusing businesses with misleading prices and false claims. For instance:
- Leasing agents push leases that are difficult, if not impossible, to break and would obligate the company to pay out the lease to the end of the term, if broken.
- Agents often promise that leased terminals are fully programmed, ready to use and under full warranty and claim that brand new terminals would not offer these benefits. On the contrary, a business can purchase fully programmed, ready to use terminals, including a year warranty, for roughly $350 or less.
- Many times, we find that agents have sold companies on a lease through confusing pricing methods, blending the merchant account fees with the equipment costs. Agents often claim that these ongoing fees offset the cost of the leased equipment or make deals that sound like the equipment is being offered for free. In reality, they have simply created a smoke screen of complexity to make a sale.
We suggest that business owners evaluating these proposals always keep the issues of equipment cost and account fees separate. Seek the optimal deal on both separately without allowing a sales representative to fold the two together, creating unnecessary complexities.