Should you Lease a Point of Sale System? Benefits it can offer.
At the same time that a business is faced with the decision of updating its point of sale system, it is also faced with the question of whether to lease it or buy it outright. This article discusses some reasons why it could possibly be better to lease.
What are the benefits for the business owner who leases a point of sale system?
1. When starting up a new business, leasing can help you preserve precious capital. A medium scale POS system can run tens of thousands of dollars. How much cash does the business generate on a monthly basis? Are there any other expenditures coming up – such as tax bills, or advertising campaigns – that might require the business to hold on to some cash?
2. Leasing can increase your purchasing power by allowing you to get a more robust system that can increase your ROI right now. Leasing a system now allows you to get more than you might otherwise be able to while still getting the equipment that you had planned for next year – maybe more terminals, or digital signage. These purchases might make you more money right this minute. Example – you can “make do” with four terminals right now, but you know that if you were able to add the extra terminals you really want for the back office, or the camera surveillance system you need, your business performance would improve there as well.
4. Tax advantages may be useful. Lease payments can usually be written off entirely in the year you make them, as opposed to the purchase of capital equipment which may need to be amortized over a long period. Check with your CPA to see whether this applies to your business.
5. Spreading the cost of the POS system over time, and matching costs more closely to the benefits you receive. Why dump a bunch of money into a system right now, when the benefits come every day for years?
6. Constant rate financing. Unlike a bank line of credit, which can vary with different benchmarks like LIBOR or the 10 year note, the lease rate you negotiate will usually be constant for the term of the lease. With interest rates fluctuating and set to rise over the next couple years, this could be the best time to lock in a rate.
7. 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.
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