Convert Rental Agreement to Rental Purchase Option
The process for a rental purchase option (RPO) enables a rental customer to rent a piece of equipment for a specific period and then buy it when the rental period ends. This can be agreed on while the rental agreement is being created or later, when the equipment is already on rent under a regular rental agreement. Pricing in an RPO scenario differs from a regular rental scenario or from a regular sale of rental equipment. In this scenario, the pricing is based on a rental curve.
This functionality enables you to create an RPO directly when you create the rental agreement and at the same time obtain a correct RPO curve for pricing. This means that no quotation is needed to obtain the correct pricing (referring to equipment quotations management, not rental quotations). The RPO curve is calculated using the conditions defined in the settings program 'Convert Agreement Line to RPO' (STS106).
You can add, update, or delete the RPO curve for quotes or for temporary or active agreements.
Background
In a rental scenario, when a rental agreement is being created the rental customer might want to buy the rental equipment when the rental period ends. A rental purchase option satifies this requirement. The pricing is based on a curve that is calculated using several parameters.
Limitations
You can only change the input values in (STS106) while the rental agreement status is preliminary or quotation (statuses 05 to 10). You cannot change these values if the rental agreement is active (status 20 and higher).
Workflow
Creating the RPO from an agreement line
The RPO for a line is created from the agreement line in 'Rental Agreement. Open Lines' (STS201) by selecting option 46=Calculate RPO. This opens 'Convert Agreement Line to RPO' (STS106).
STS106 contains some default fields and others that must be manually specified:
Default fields:
-
Valid from date
- If the agreement has not been invoiced, the 'Valid from' date in 'Rental Agreement. Open Lines' (STS201/E) is used. This is because the curve can be calculated from the start date of the rental agreement line.
- If the agreement line has been invoiced, the 'Valid from' date will be set to the invoice date +1 day.
-
Sales price
- The sales price is retrieved from 'Serial Number Based Pricing. Open' (MMS250).
Manual input fields:
- No of periods: The number of months the piece of equipment will be on rent before the sales date.
- Interest type: Browse on 'Leasing Interest Type. Open' (LTS402). Mandatory.
- Interest rate: Retrieved from 'Leasing Interest Type. Enter Values' (LTS403). Optional.
- Residual percentage: Defines the remaining value on the sales date compared to the Valid from date.
- Residual value: Calculated according to the entered residual percentage.
- Rental charges: Charges added to the rental amount.
When you press Enter, the rental amount is calculated according to the values specified in (STS106). You can view the curve by clicking the Display button. This action opens 'Rental Purchase Option Curve. Open' (STS108).
Result on rental agreement line
When checking the rental agreement line and values in 'Rental Agreement. Open Lines' (STS201/F):
- Rate type is changed to 3 (months).
- Rate and net rate/type are updated to the rental amount in (STS106).
- The 'Rental purchase opt' check box is selected to indicate RPO.
- The Display button is enabled. This button opens the RPO curve.
- Sales date has been updated with the end date of the RPO; this is the future sales date.
- Sales price is the residual value at the sales date.
Deleting an RPO
Using F16 in (STS106) deletes the RPO calculation. The RPO curve and record are deleted.
After the RPO curve is deleted, values in (STS201) are removed:
- 'Rental purchace opt' is no longer selected.
- The Display button is disabled.
- Sales date and sales price are cleared of values.