Leasing vs. Purchasing Credit Card Equipment

If you want to process credit cards and other electronic payments in-person, you’ll need the right equipment. Having the right hardware allows you to safely and securely process all the different types of cards customers may use – credit and debit cards, prepaid cards, gift cards, and even NFC and mobile payments.

You have two options for obtaining the necessary equipment for processing credit cards: leasing and purchasing. Leasing may be the better option for some businesses, while purchasing is better for others. It all comes down to the best option for your particular business.

Leasing Credit Card Equipment

Leasing equipment means paying for it in monthly installments over a specific period of time instead of all at once. Your lease agreement may include interest for the convenience of paying for the equipment over a period of time.

When you lease, you don’t own the equipment until you’ve completed the terms of the lease. Then, at the end of the lease, the equipment is yours to keep.

Why Lease Your Credit Card Equipment

  • There’s no upfront cash requirement. Financing your equipment means you don’t have to decrease your operating income by the amount of the equipment price. Plus you get the added benefit of being able to accept credit cards right away. Your business can maintain liquidity by not having to spend cash upfront.
  • It’s easier to upgrade your equipment. Leasing makes it easier to take advantages of improvements in credit card equipment less loss than if you’d purchased your equipment upfront. Upgrading your equipment protects you and your customers from fraud losses.
  • Extended warranties that cover the lease period. If anything goes wrong with the equipment, you can have it replaced or repaired during the lease.
  • The cost of lease may be deductible. Your accountant or tax preparer will be able to give you more information about the tax benefits of leasing your equipment.
  • Establish and strengthen business credit. Making timely payments on your lease will help you establish or improve your business credit. As your business credit improves, you’ll be able to qualify for other types and amounts of financing, even with major lenders.
  • There’s no impact to balance sheet. Take advantage of off-balance sheet financing and avoid listing the lease as a liability on your company’s balance sheet. This can be especially beneficial if your company already holds a large amount of debt. Make sure you consult your accountant for the best accounting practices.

Drawbacks of Leasing

  • A lease is a binding contract. You’ll owe the money for the lease whether business income is up or down and even if you go out of business. Fortunately, you have the option to sell or transfer the lease to another business.
  • You’ll pay more for the equipment over time. Because you are also paying interest on the lease, you will ultimately pay more for the equipment than if you paid for it upfront.

Businesses who decide to lease their equipment consider the additional cost a small price compared to flexibility and overall benefits of paying for credit card equipment over a period of time.

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Purchasing Credit Card Equipment

Purchasing your credit card equipment means paying in full upfront. There’s no monthly fees and you own the equipment as soon as you pay for it.

The Case for Purchasing Your Equipment

  • You’ll save money overall since you’re not paying interest. Because you pay for the equipment upfront, your business saves on the long-term interest cost associated with leasing.
  • Payment affordability isn’t an issue. When leasing equipment, you have to be sure you can afford to make the monthly payments. Otherwise, missing payments would cause you to default on  the terms of the lease. When you own the equipment outright, the month-to-month expense is not a factor.
  • There’s no additional monthly business expenses. Buying the equipment requires an upfront outlay of cash, but improves your cash flow in the months to come.
  • You can write off the equipment in the year you purchase it. You may be able to write off the depreciation of the asset over a certain period of time. This can reduce your taxable income and overall tax liability in that tax year. Consult your accountant or tax preparer to learn more about the tax benefits of purchasing equipment rather than leasing.

Drawbacks of Purchasing

  • You’ll have to buy a new piece of equipment to upgrade. As credit card networks shift liability to merchants in certain circumstances, it becomes increasingly important for your business to have updated credit card equipment. The cost of upgrading could be more expensive when you opt to buy your equipment instead of leasing it.
  • You must reduce your operating income by the amount of the equipment price. Buying credit card equipment upfront means you’ll have less cash in your operating income. Make sure your business can remain profitable before you spend cash on credit card equipment.
  • You may have a shorter warranty than if you leased the equipment. This means that if the equipment malfunctions after the warranty period, your business will have to pay the cost of repairing or replacing the equipment.
  • You may have to borrow the money from another source, like a credit card, if you don’t have the funding. If you want to avoid a lease but don’t have the cash on hand to purchase the equipment, you may have to resort to another source of funding. This could be a credit card or small loan. You’ll still have to pay interest, but may not have the upgrade and warranty benefits that you’d have if you leased the equipment.

EBS offers both leasing and purchase options for our credit card payment solutions. Review our payment solutions, then contact us to discuss the best option for your business.


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