With most computer hardware resellers looking for an edge above and beyond standard margins, one financial company believes it has a solution to assist resellers in clinching sales and building repeat business.
According to Flexirent director Andrew Abercrombie, his company is able to offer a commercial rental alternative to cash payment of computer equipment for prospective buyers. Abercrombie says Flexirent has a number of advantages over traditional finance arrangements, as it's an off-balance sheet product. This means that the leasee is not required to identify the ongoing liability on a balance sheet and hence it is not treated as typical debt. Also, all payments are tax deductible.
Abercrombie says the high level of depreciation of computer equipment makes Flexirent an effective alternative to cash purchase. "Owning a house is smart, because it's an asset that will grow over time. But the absolute antithesis of that is computers, which will maintain a fraction of their new value after only a short space of time," he said.
"The other variable is that most people with a traditional ownership mentality think owning is prestigious and satisfying. What it really does is chew up your capital," he said. Abercrombie says that while computer equipment can be depreciated, the rate is not nearly enough to match the true rate of depreciation, leaving the hardware's value on a company's books higher than its actual value.
How it works
Flexirent works through the company purchasing the equipment from the reseller on behalf of the would-be buyer, thus taking on the risk of depreciation. The would-be buyer then becomes a renter, and enters into a contract with Flexirent to pay a set amount of rent each month over a fixed period. At the expiration of the agreement, the renter may then opt to go into a further agreement, where Flexirent directs the renter to return to their reseller and select another machine. Depending on the new model chosen, the renter then may end up making the same payment but for a more powerful system, due to advances in price performance.
Abercrombie says renters can upgrade during the period of the contract, by opting to pay extra on the monthly rate. He says this is not possible under existing finance arrangements. Furthermore, as ownership is retained by Flexirent, the renter is not left owning a substantially depreciated computer at the end of the contract.
Flexirent then sells the returned equipment, but Abercrombie stresses he is not competing with resellers in a second-hand market. "We dispose of the unit so that people can go and buy a new one from the reseller. We facilitate the desire of people to buy new equipment all the time. And we do it by making it easy for them to change and upgrade, and by making it easier for them to give us their old one back and go out and buy a new one," he said.
Features and benefits
Abercrombie sees great benefits for resellers in selling equipment beyond the box. "Clearly, margins are diabolically competitive. When someone walks in to a reseller and says they want a PC, they get the price then go into the next. And it's cruel on margins. With Flexirent, if a customer walks in and asks the same question, you can say it's this much but ask if they've thought of Flexirenting, where it will only cost them a certain amount a month.
"Then the reseller can ask if they've thought of getting a printer with the computer and, say for another $60 a month, you can throw in a printer, a scanner and so on. It enables the dealer to up-sell on Flexirent prices rather than cash prices. We believe we can not only increase the number of sales a reseller can make, but we can also either increase, or at least help them maintain, their margins."
Resellers are charged for usage of Flexirent. Abercrombie says this is necessary, in order to subsidise a free helpline number (1800 647 461) and the training of resellers. Abercrombie says Flexirent is able to approve a renter's status in 10 minutes, after performing a credit reference office check, rather than a lengthy finance risk assessment. Abercrombie says this enables the reseller to capitalise on instant gratification, in the renter not having to wait days for finance company approval.
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