How Do Point-Of-Sale System Leases Work?
Businesses who either do not wish to incur a large initial cost for a POS system, or who do not have the capital available for such a large upfront purchase, often choose to lease the technology instead. A POS system lease involves a contractual agreement between the business and the merchant services provider, referred to in the contract as the lessee and the lessor, respectively. This contract specifies the details of the lease agreement, such as the duration of the lease (usually in months, such as 12, 24, 36, etc.), the amount of the monthly fees to be paid, and other contractual obligations such as maintenance requirements, approved uses of the equipment, and other restrictions.
Under a lease agreement, the payment processing equipment technically remains property of the lessor/merchant services provider, and is not officially owned by the business/lessee. This situation carries with it certain advantages, and also some notable liabilities, for the business. First, as long as the equipment is used and maintained properly according to the details of the lease agreement, then most issues related to defective or malfunctioning technology would usually be the responsibility of the merchant services provider to fix, which is beneficial for the leasing business as they would not incur additional costs to replace faulty or broken payment stations.
However, in the event that problems arise that lie outside of the specific details of the lease contract, then the responsibility of addressing these issues is typically thrust upon the leasing business. This can result in unexpected costs to replace equipment, fees associated with breaking lease agreement clauses, and other types of penalties. Understandably, this places a great deal of pressure on the business to ensure they are following the lease agreement to the letter in order to avoid these types of troubles.
In addition, not all lease agreements are equal in terms of what the leasing merchant services provider will offer for support. Some may include software updates and technical support services in the agreement, but others may leave these items out of the contract and simply charge these services back to the business as separate costs as they are incurred. As you’d expect, these costs can often pop up unexpectedly and be difficult to anticipate as part of your monthly operating expenses. It’s always important to check and double-check the lease agreements, to make sure your business gets the level of service and support you need, without surprise costs creeping up at some point in the future.
So, while there are some advantages to choosing to lease your business’ unattended payment terminals, these benefits are generally dependent on the specific language of the lease contract and how it divides responsibility for the various aspects between the lessor and the lessee. But what about choosing to purchase POS systems outright? How does this approach compare to leasing?