The Problems with Leasing a POS System

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Point of sale systems, often referred to as POS, are integral to a small business. Not only is this where businesses actually make the money, but where relationships and perceptions are born while customer and seller interact. A point of sale system may include:

POS system hardware –  can include a chip reader/scanner, a user interface, a computer system, and much more. These systems are fully online for security and data backup purposes. Most current-generation POS systems are supported by the cloud.

POS system software – might include apps for processing credit cards, other sales, track consumer behaviors, and much more. You can essentially think of these software components as a way to centralize all of your business’s basic functions into a singular unit.

While POS systems value is unparalleled, some small businesses are leasing one of the most important parts of their sale. While leasing may seem like the way to go, especially for a new small business, you may want to think twice before signing a lease agreement.

Leasing Structures for POS

Leasing Structures for POS

Leasing a point of sale system certainly does seem enticing to new business owners. To make money, there is a need for a system to actually make the purchases. However, purchasing the hardware and software can be an expensive upfront cost that could be better spent on other start-up costs. This is where leasing comes in. According to Top POS Systems, a website dedicated to POS reviews and advice, there are several kinds of leasing agreements that businesses can enter into.

  1. Stretch Lease

  2. Sale-Leaseback

  3. Lease to Own

  4. Quarterly

  5. FMV (Fair Market Value) Lease

  6. Semi-annual, Annual, Seasonal

  7. Lease line of Credit

  8. Step Up, Step Down

These lease agreements can be flexible, especially for the end of the lease. “Multiple options generally exist for the end of a lease – these can include the return of the equipment, the outright purchase of the equipment, or lease renewals.  These offer more flexibility than simply writing a check now for a full system.”

The Problems with Leasing

The Problems with Leasing

  • Leasing a POS system may seem like the perfect solution for startups. Monthly fees compared to a large upfront cost and (usually) free software updates ensure that small businesses have a way to make money and are up-to-date with the latest payment technologies. However, there are plenty of downsides that could impact your business down the line. Here are some of the downsides to leasing POS hardware and software.

  • Long-Term Agreements – When signing an agreement, you may be locking yourself into a long agreement, usually 48 months or more. While your business may have low cash flow, in the beginning, you could end up spending more by leasing a POS system over time by entering a long-term lease agreement. There are fees attached to leaving or breaking the contract early as well. 

  • Hidden Fees – In some lease agreements, leasees are required to pay fees to cover “depreciation, obsolete hardware and other expenses.”  

  • High-Interest Rates – Another huge downside to leasing is the interest payments can add up over the length of the lease term. Some interest fees can be anywhere from 13-20% based on the term. 

  • Credit Check – To enter into a lease agreement, the company leasing the hardware and software will need to run a credit check, which may be detrimental to some small startups with poor credit. 

  • Delays in Arrival – Another downside to leasing a POS system, especially for new businesses, is the amount of time it will take to actually receive the system. Between credit checks, signing agreements, and sending payments, the process for actually having the system be in the store could take much longer than if you were to buy the system outright. 

So, while leasing may seem like the best option for startups struggling for revenue, you could end up spending thousands more. Between monthly and hidden fees, high-interest rates, and long-term agreements, it is likely cheaper to just buy a system outright.

Clover POS

Clover POS

Now that we know the many downsides of leasing a system, it seems like the best solution is to simply invest wisely in a POS system you can trust that will offer the best ROI. Clover offers a variety of POS systems from full terminals to handheld mobile payment solutions for a number of businesses ranging from restaurants to retail. The Cloud-based system accurately and seamlessly stores and manages information that you can access from anywhere – no need to be in store. Plus, unique features like third-party app integration and detailed reporting lets you run your business your way. Clover systems also come with 24/7/365 support, so you can rest easy knowing someone has your back.

Next Generation POS Systems from True Merchant

True Merchant is proud to offer both point of sale (POS) and Enterprise Resource Planning (ERP) solutions for businesses of all sizes. With our focus on merchant services and secure payment processing, POS and ERP systems are a natural extension of our other features such as CardSecure, EBT Payment Processing, and much more. With True Merchant, you can rest assured that you will be getting the best available price thanks to our complimentary rate reviews.

If you are considering a POS system for your business, please feel free to contact us by calling 1-888-770-2018 or through our online email form. A qualified merchant service professional will be waiting to walk you through the process!