Terminal leasing pitfalls, and how to avoid them.

The biggest terminal leasing pitfall is that most equipment leases are separate, non-cancellable contracts that keep billing for the full term, even if you close your processing account or the terminal becomes outdated. Over a multi-year term, the total paid can be many times the price of buying the same terminal outright.

This is general advice for business owners, based on the patterns we see on merchants’ statements and contracts. Every lease is different, so read yours closely, and talk to an attorney if you are considering a dispute. This isn’t legal advice.

How terminal leases usually work

When a sales rep offers a terminal for a low monthly payment, it is often a lease with a third-party leasing company, not with the processor. That matters, because:

• The lease is a separate contract with its own terms, often signed at the same time as the processing application.
• The leasing company is paid whether or not you still use the processor that sold it.
• The term is often several years, and the contract may say it can’t be cancelled.
• At the end of the term, some leases roll into month-to-month payments or renew unless you give notice and return the device.

Many owners only discover the lease when they try to switch processors and the monthly charge keeps coming. See the switching processors checklist for how to check before you move.

The pitfalls, one by one

Pitfall	What it looks like	What to do
Non-cancellable term	You owe every remaining payment, even if the business closes	Ask for the cancellation terms in writing before signing
Total cost far above price	Monthly payments add up to many times what the device sells for	Multiply the payment by the number of months and compare
Outlives your processor	You switch processors but the lease keeps billing	Treat the lease and processing as two separate decisions
Outdated equipment	You are still paying for a terminal that can’t take tap payments	Choose current models, and avoid long terms on fast-changing hardware
Extra fees	Insurance, damage waivers, taxes and late fees added to the payment	Ask for every charge that will appear each month
Automatic renewal	Payments continue after the term ends	Calendar the notice date and return the equipment as required
Locked to one processor	The device can’t be reprogrammed if you switch	Ask whether it works with other processors

Questions to ask before you sign

1. Is this a purchase, a month-to-month rental or a lease?
2. Who is the lease with: the processor or a separate leasing company?
3. How many months is the term, and what is the total of all payments?
4. Can I cancel early? If so, what does it cost? If not, say so in writing.
5. What happens at the end of the term: do I own it, return it or keep paying?
6. Are there insurance, protection or other fees on top of the payment?
7. Can this terminal be used with a different processor?
8. What is the price to buy the same terminal outright?

If the answers are vague, or you are told “it’s just the same as a processing fee”, slow down. A terminal’s monthly lease and your processing fees are two different bills.

It also helps to ask for a day to read the paperwork. A reputable provider won’t object to you taking the agreement home, reading every page and checking the numbers. Pressure to sign on the spot, or a promise that the details “don’t matter”, is a reason to wait.

Read every page you sign during a processing application. Lease agreements are sometimes included in the same packet as the merchant application, with their own signature line.

Better alternatives for most businesses

• Buy the terminal outright. You own it. If you switch processors and it can be reprogrammed, you keep using it.
• Rent month to month. Useful for seasonal businesses, events and trying a device. You can return it when you no longer need it.
• Use what you have. If your current equipment accepts chip and tap and can be reprogrammed, you may not need anything new.

Before choosing a device, our guide on how to choose a card terminal walks through features, connections and compatibility.

If you are already in a lease

You have fewer options once a lease is signed, but you still have some:

• Find the lease agreement and note the leasing company, term, monthly charge, end date and notice requirements.
• Ask the leasing company in writing for the payoff amount and the exact end-of-term process.
• Compare the payoff with the remaining payments. Sometimes paying it off is cheaper than continuing.
• Put the end date and any notice deadline on your calendar, so it doesn’t renew by default.
• If you switch processors, plan for the lease payments separately and keep the device in good condition for return.
• If you believe you were misled, keep notes and copies, and talk to an attorney about your options.

Switching processors doesn’t end a lease, but it can still be worth doing if your processing costs are high. See what happens when you switch processors.

What PayZoom does

We look at your equipment and statements together and tell you plainly what you are paying for hardware and what you are paying for processing. If your current terminal can be reprogrammed, we will say so. When you need a device, PayZoom hardware covers countertop, handheld, mobile and POS models, and we also offer rental terminals. PayZoom charges no early termination fees, and a real person answers when you call.