Putting an ATM (automated teller machine) on the premises of your business – such as a gas station, a restaurant or a salon – can be a convenience for your customers or passersby. It can also be very profitable. An ATM is likely to be accessed dozens of times a month. The fees from those transactions will generate revenue for the owner that can add up to thousands of dollars per year.
If you're thinking about adding an ATM to your business, the first thing you need to decide is if you would rather rent or buy the machine. There's no absolute right answer to that question; it depends on various factors tied to your business. If you're not sure whether leasing or buying is better for you, these six considerations will help you arrive at a clear decision.
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1. Upfront and monthly costs
The upfront costs of an ATM are different depending on if you are buying or leasing the ATM.
"Upfront costs can come at a hefty price point," said Nishank Khanna, chief financial officer of Clarify Capital. "Installation is your main expense, which costs between $50 and $500. Additionally, you'll need to have a cash reserve of around $1,500 at all times in the ATM."
In the short term, leasing an ATM can cost less than buying one. The monthly cost for leasing varies depending on the model, but it may run from $75 to $100 per month. There are also additional costs to consider.
"It costs more if you also are renting a wireless modem or want to use a cash loader," meaning someone else provides the cash, said Chris Yim, co-founder and CEO of LibertyX.
Another leasing cost to consider is any interest you'll accrue, which is standard for leasing contracts, which can raise the leasing cost to well above the price of the ATM when all said and done, Khanna said. As such, buying an ATM may be cheaper over the long haul.
To buy an ATM, you can expect to pay anywhere from $1,000 for a basic, used model all the way up to $10,000 or more for a new one. ATMs that are installed in a wall can cost $5,000 to more than $10,000. Newer models are likely to come with some valuable enhancements, such as large, touchscreen displays and accessibility functions for people with disabilities and hearing impairments.
If you plan to keep an ATM on your business's premises indefinitely, buying one upfront may be the better deal in the long run. However, if you're uncertain how long you'll need a machine, or if it will be worthwhile to your business's bottom line over the next year or two, leasing could work better as a proof of concept.
2. Latest ATM models
Whether you're buying or leasing an ATM, make sure you get a model that doesn't have any major issues or complaints. As with any other used product, you don't know how the person who owned it before you treated it or where it was located. That doesn't necessarily mean you're better off getting a new one; it's just something to consider. Regardless of whether you lease or buy, a brand-new model will be more expensive, at least upfront.
If the ATM retailer you're leasing from offers a variety of models, leasing may give you the flexibility to choose an ATM that best matches your business's premises. Plus, you may be able to upgrade to a better model in the future.
Leasing an ATM also gives you the chance to try out a few different used models and brands so you can get a firm idea of which one you'd want to buy in the future, if that's what you ultimately want to do.
The Genmega G2500/Onyx and the Hyosung Halo 2 are the most popular ATM models from the two largest nonbank ATM manufacturers, Yim said.
Buying a new model costs more than buying an older model or a used one, but consider that the ATM's looks can be important. An older or used ATM can give customers the impression that it is less secure. For instance, an ATM with a small display that is not a touchscreen may appear less safe and reliable than one with a bigger, full-color touchscreen.
If you own your ATM, you will be responsible for most of the maintenance, or you'll have to pay someone to come fix it if something breaks. The retailer you bought the machine from may have techs on staff or may refer you to a contractor who can repair the ATM for a fee.
"ATMs are built to be workhorses," Yim said. "However, it is useful to have common spare parts (cassettes, receipt paper, wireless modems) to minimize any downtime when things do go south. Expect to be on call in case the internet goes out, cash isn't dispensed properly or a customer's card is stuck."
When you lease an ATM, the retailer will handle most of the maintenance for the machine. Be sure to scrutinize the maintenance provisions in the contract before signing it.
If you're leasing a used ATM, the repairs might be more frequent and crucial, depending on how old and used the ATM is, so that might be something to negotiate in the lease agreement, if possible.
There are some points to keep in mind regarding the differences in the maintenance costs between buying and leasing an ATM. When you lease an ATM, should the unit malfunction, the leasing company typically contracts with a repair service. You, as the lessee, are not responsible for repair costs, but you will experience lost revenue for every day that the ATM is not working. When you buy, you will be the one responsible for the maintenance. That means you will have to find a repair company, negotiate a price and incur the cost of the repairs.
As with leasing, older ATMs are more likely to require more frequent and expensive repairs.
4. Fees and profit
To understand the full picture of how much you can make by having an ATM at your business, it's important to know the earnings potential for both leasing and buying the machine and to compare those amounts with the costs involved in setting up and maintaining the ATM.
Under a lease plan, the fees you pay are usually already calculated by the retailer to include a percentage of the service charge.
If you own your ATM, you get to keep a higher commission-per-transaction fee that's charged to customers who withdraw cash from the machine. Plus, you could make additional money on an ATM that you own by running ads on the display.
One of the most important factors in your profit from the machine is its location.
"A good rule of thumb is, an ATM should do at least 50 transactions per month or you should find another location," Yim said. "At 50 transactions and a $3 surcharge, you make $150 per month before you pay out any commissions/revenue share.
"Top locations can do upwards of five to 10 times that," he added. "If you have a fleet of 50 ATMs at $150 per month, you are grossing $7,500 per month. If you are doing the cash loading and maintenance yourself, the only real expense is your time. If you have employees to manage it or utilize a cash loader, then you will need to net that out."
5. Your type of business
The type of business you run should be a factor in your decision to rent or buy an ATM.
When you lease an ATM, the company that owns the machine can determine where it's placed, so your business type matters. The good news is that the owner of the ATM also wants to make money, so they will want to put the machine in an optimal location. The downside is that it may not be the best spot for you in terms of the layout of your business.
If your business is a bar or restaurant where many of your customers use cash, leasing an ATM could be a smarter choice because it will probably be used more and thus may require regular maintenance to keep it running smoothly.
If the machine will be sitting in the lobby of an office building that has light foot traffic and the cash it dispenses isn't going to be spent with your business, then buying will be the better investment.
When you buy the ATM, you get to choose where it goes. It matters less what type of business you have, because you can determine the best place for foot traffic and make sure that it is placed where it won't impede other areas of your business.
6. Insurance and liability
Insurance and liability considerations pertain more to owning an ATM, because if you are leasing one, the liability and insurance will fall to the owner of the ATM.
"The biggest liability of owning an ATM is the risk of theft," said Paul Weaver, a financial expert and founder of The Income Finder. Weaver also noted a few other liabilities of owning an ATM:
- Risk of carrying around large sums of cash when filling or emptying the machine
- Malfunctioning machinery, and possible lawsuits as a result
- Regulation changes, such as requiring chip readers, which necessitates sizable investments in the ATM machine itself
- Issues with your banking relationship due to the high risk of money laundering
Weaver said that if you own your ATM, you are not required to insure it, but if you don't, you risk losing all of the cash inside if a theft occurs.
"Insuring an ATM isn't cheap, and the risk of losing your insurance after one or two claims is likely," he said. "Insurance requirements when leasing would be a negotiable term in the lease agreement."
Pros and cons of leasing vs. buying an ATM
To help you decide between leasing and buying an ATM, we've broken down the pros and cons of each option.
Leasing an ATM
- You're not solely responsible for maintenance.
- You pay fewer upfront costs.
- You can test out a few different models over time.
- There's less opportunity for profit.
- You might not get to choose where the ATM is placed within your business.
Buying an ATM
- Profits are higher.
- You decide where the ATM is placed within your business.
- You are responsible for maintenance and repairs.
- Upfront costs are higher.
Before you decide which option is best for your business, consider the costs, maintenance, profits and flexibility with placement.
While there are many factors to take into account, Yim thinks most businesses are better off buying.
"They can learn the tools of the trade quickly, and if they decide they want to level up and take on some debt, they are in a better position than leasing out of the gate," Yim said.
Additional reporting by Howard Wen.