Long term contracts are a serious consideration to any business. They are a major commitment and can go south quickly if something goes wrong or if you are not fully aware of the terms of your agreement.
Over the years, we have identified and compiled some key questions that you should be asking a telematics company if they ask you to sign a long-term contract.
Device Ownership
Are you renting the device? Or is it on a hire purchase or a chattel mortgage? Essentially asking if you will own the device at the end of the contract.
Does the Subscription Reduce at the End of the Term?
Does the monthly subscription fee reduce at the end of the initial term? This relates to the question above about device ownership. If you are only renting the device, then you may keep paying the same monthly fees if you extend the contract past the initial term.
How Much is the Overall Hardware Cost?
What portion of the monthly subscription is paying for the hardware? This is really important to consider in your cost-benefit analysis of different telematics plans. For instance, let’s say that the hardware costs $17.50 per vehicle per month over a 36-month period. So, over the term of the contract, that will cost $630 per vehicle. However, you must compare this to what you would pay upfront for a device, which may be as low as $250. On a fleet of 20 vehicles, this is an additional cost of $7,600.
Termination of Contract
Do you have to give notice to terminate the contract at the end of the term? We have seen contracts that require you to give seven months’ notice prior to the end of the contract to terminate it, otherwise, it will roll automatically for another 12 months. Yikes!
Increasing Your Fleet During a Contract Period
What happens if you want to add ten more vehicles to your fleet in 12 months’ time? If you’re on a 36-month contract, does the new contract for the 10 vehicles start in 12 months’ time? This can create rolling contracts that make it very difficult to move away from the telematics vendor.
Lack of Support and Training
What happens when you sign up for a long-term contract, but the support and training provided are below par or non-existent? If there are no service level agreements in place, you may find yourself very unhappy.
So, what might initially seem like a good plan where you’re not paying any upfront fees, could become quite costly and frustrating in the long term.
Do your due diligence and make sure that you have a good read of a contract before signing it.
