Glossary: Lease-to-own

What is lease-to-own?

Lease-to-own, also known as “rent-to-own,” is a flexible purchasing arrangement that allows customers to acquire a product immediately while paying for it over time. This option is particularly advantageous for those with a low credit score, or who prefer not to immediately commit to a complete purchase.

How does lease-to-own work?

In a lease-to-own agreement, the customer gains immediate access to the product but pays for it in installments over a set period. Once all fees are completed, the customer becomes the outright owner of the product.

Benefits of lease-to-own

  • Immediate access: Customers can enjoy their purchases immediately, without the burden of a full upfront payment.
  • Improved affordability: Spread-out payments make products more affordable for customers.
  • Enhanced approval rates: Good embedded finance platforms with multiple lenders that utilize a lending network and waterfall financing, have a higher chance of POS financing approvals.
  • Flexibility: Some embedded finance platforms offer various repayment terms and options under the lease-to-own option, accommodating different financial situations.

Limitations of lease-to-own

  • Higher overall cost: Lease-to-own arrangements often result in a higher overall cost compared to purchasing the item outright.
  • Limited flexibility: Lease-to-own contracts can lack the flexibility of traditional leases or outright purchases.
  • Market depreciation: If the item being leased depreciates in value, the customer will end up paying more than the item is worth.

Lease-to-own is one of the many POS financing solutions available on ChargesAfter’s embedded finance platform, giving shoppers access to financing choices and personalization.