Rent smart: know your end-of-term options
Much has been written about the benefits of IT rental as compared to cash purchase, from optimising cash-flow to keeping financials liquid and fixing equipment costs. On the other hand, not enough has been said about what happens at the end of the rental term. Previously, many companies have chosen not to rent because of the lack of information available about their end-of-term (EOT) options, or because they are afraid of getting roped into a sticky contract that will end up costing them money in the long run.
Thankfully, says Jane Cartwright, Operations Director at RentWorks, things have changed over the last few years. Rental terms are far more appealing than in the past and customers now have access to a range of flexible EOT options that take their needs into account. In fact, IT rental now offers organisations a host of benefits in terms of e-waste management and EOT asset disposal.
“With the introduction of e-waste legislation, companies need to be careful about how they dispose of assets,” says Cartwright.
Cahl van Wyk, Remarketing Specialist at RentWorks explains that eWASA, the e-Waste Association of South Africa, was established in 2008 to set up and administer an environmentally sound e-waste management system for the country. “When it comes to getting rid of e-waste, companies need to do so in accordance with eWASA guidelines. Responsible IT rental companies registered with eWASA are able to do this on their clients’ behalf, ensuring that the proper procedures are followed and the necessary certificates issued,” he says.
Van Wyk speaks from experience – RentWorks was one of the first five members of eWASA and takes great pride in its ability to manage e-waste obligations for its clients. He points out, however, that IT rental can actually play an important role in ensuring assets are used to their maximum value.
The role of rental in sustainable IT
“At RentWorks we see ourselves as experts in residual value,” says Cartwright. “Once the rental term is up, there is still value in the asset, which is why we are happy to take it back. We can then re-rent it in a different market at a lower cost.”
Some of the organisations that rent used assets include cost-conscious companies who don’t need or want to spend money on the latest cutting edge equipment, as well as schools and businesses around the African continent. Organisations wanting to rent IT equipment for specific projects may also choose to rent used computers instead of brand new machines. All of the IT equipment that is returned at the end of the rental term is checked and fully refurbished before being leased out again at reduced rates.
“Instead of storing up ancient PCs in a storeroom in the basement, companies who opt to rent and return their IT equipment can ensure that the assets are used sustainably and help to bridge the technology divide in South Africa and the rest of the continent,” says Cartwright. “When assets are returned to us, we do our best to recycle them. It’s only if they are actually obsolete that we will dispose of them.”
Companies can choose to re-rent the same assets post-EOT, at a reduced rate, freeing up cash to use on core business activities, or they can also decide to buy the equipment from the rental company.
EOT options to suit your business needs
Berlin van der Merwe, Logistics Manager at RentWorks, explains that an IT rental company should ideally contact its clients a few months prior to the end of the rental term to discuss the various options that will best suit the company’s needs. The client may want to return the equipment, embark on a new lease with new equipment, extend the current lease, or purchase the equipment.
“Once the client has returned all their assets, their obligation effectively ends,” says Van der Merwe. To make the tracking and management of assets easier for customers, RentWorks has launched an asset tracking service called REAM. “We also have quite a high degree of flexibility in terms of the assets returned,” she says. “If a client can’t find the exact machine but wants to replace it with a different unit of similar value, we are happy to accept it.”
RentWorks also assumes a certain loss value in clients’ pool of assets to alleviate customers’ fears of not being able to return each and every machine they have rented. “We are flexible in that regard as it builds longevity,” says Cartwright, adding that the best practice on rental agreements has shown that the system works best when the rental company is willing to accommodate the client and be more flexible.
Avoiding hidden costs
Cartwright says that it’s important for companies to examine the logistics side of rental agreements. For example, is the IT rental company able to assist with fetching the assets at the end of the rental term? Does the business offer an asset tracking solution to help clients maintain visibility of each and every unit?
As an example, she explains that RentWorks applies the same pay-for-use model that makes IT rental the most cost-efficient option to its own operations. Instead of owning warehouses and shouldering the overheads of running a transport arm of the business, RentWorks partners with specialist service providers and outsources non-core activities like deliveries and warehousing. By only paying for these services when they are needed, the company ensures that its clients are not paying unnecessary costs.
Van Wyk points out that the introduction of the Consumer Protection Act in South Africa also requires sellers of used IT equipment to carry a warranty for six months. This applies even to companies that have purchased IT equipment in cash and then sell them on to employees. “You also need to be registered as a licensed seller of IT equipment, and ideally the seller should be registered with Microsoft too,” he says.
RentWorks and other leading IT rental companies are accredited by Microsoft to upgrade PCs and supply customers with machines complete with Microsoft programmes and operating systems, which offers a safety net for the client, whether s/he is renting or purchasing the asset. Instead of buying equipment ‘voetstoets’ and having to bear the costs if there is a problem with it, customers are assured of a warranty and recourse.
What to think about in terms of EOT options:
- Before entering into a rental agreement, ask about the EOT options. Find out how flexible the company is in terms of extending the lease, returning the assets and managing the disposal of the assets where necessary. Ask about the possibility of purchasing the equipment. Find out how the company communicates with customers in terms of their EOT needs.
- Check up on the company’s green IT and e-waste management credentials. Ask whether the organisation is a member of eWASA and investigate its disposal channels.
- Examine what happens to assets once they are returned to the company. Is there an opportunity to re-rent the units at a lower price? Are the assets made available to a new secondary market such as schools or start-up businesses?