You Should Know This Before Getting Into A Point Of Sale Leasing Agreement

Every business needs to evaluate whether it should buy outright or enter into a point of sale leasing agreement.

point of sale leasing agreementIn a competitive and fast evolving business environment, retail technology has taken a center stage in most business operations. Point of sale technology is particularly crucial in fast efficient merchandising as preferred by modern shoppers.

Point of sale equipment ranges from cash registers to customer management systems, assisted selling technology, loyalty systems, display and payment systems among others. Point of sale equipment leasing may be justifiable if the nature of the business does not allow tying up large capital in equipment purchase. Here are some of the major considerations the business can make before entering into a point of sale equipment leasing

Pros Of Point Of Sale Equipment Leasing

Ability To Obtain The Latest Technology

Technology usually evolves fast and this also closely applies to point of sale technology. Buying a given point of sale equipment will thus tie a company down to using the equipment for a longer period even if more efficient equipment is already in the market. Through leasing agreement, a company will be able to replace equipment as soon as the leasing period has ended.

Easy Cash Flow Management

Purchasing, as opposed to point of sale equipment leasing does not lock up most of the company’s finances especially if the company is not financially stable. Lease rental, though mostly monthly can be structured to according the company’s cash flow position to say, quarterly or semi-annually.

In the same line, when taxation is taken into effect, point of sale equipment leasing is cheaper. This is because lease rentals are a tax deductible expense but capital allowances will be used instead which are usually a lot cheaper. There are numerous lease agreements where initial deposits are not required. This is practical for many small and medium enterprises in need of point of sale equipment but unable to raise high initial payments.

Cons Of Point Of Sale Equipment Leasing

Agreements Are Fully Binding Within Lease Period

Many leasing companies will require the lessee to honor the lease agreement before expiry of lease period. Failure to do this could result in consequences and in extreme cases even prosecution that could hurt the company’s financial position. Restriction may be placed on how to use the machine including repairs, refurbishing and re-installations among others. Failure to honor these agreements may tantamount to problems with the lessor.

Lease Agreements May Be Complicated

As for the expensive point of sale equipment leasing contracts, leasing companies may require that the lessee gives financial proof that it can honor its obligations. Because detailed financial statements are required, it may take time for the company to obtain them. Further, calculating the periodic rental amounts that are suitable to the company may take time.

Company May End Up Paying More In The Long Run

Lease payments are usually loaded with interest which means that the company will pay more in the long run. Depending on the company’s financial statements, it can bargain for better rates. At the end of the day, it is all about convincing the lessor that you can meet your financial obligations.

Summary Of Critical Factors To Consider Before Getting Into A Point Of Sale Leasing Agreement

The first consideration that a company should take into account is the type of lease to get into. Two main types of leases are operating and capital lease. Capital leases are suitable for point of sale equipment that the company may use for a long time to come because under this deal the lessee ends up owning the item. On the other hand, other an operating lease, the lessor retains ownership of the item after lease period.

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The second item to be considered is the period of the lease. Longer period leases are usually viewed as cheaper in terms of interest or rental amounts payable. However because of prolonged payments it could be more expensive than the same point of sale equipment leasing agreement over a shorter period. Leasing period also affects the amount of rent directly. Longer period leases should thus come at lower payments. In other lease agreements, insurance may be needed and thus should be considered if that is the case. Finally, other conditions may be specific to the business enterprise that need to be considered.

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