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Lease-to-Own vs. Financing: Why You Should Offer Both

Apr 13, 2022

A young woman chooses which LTO option to use while shopping from her laptop.

In today’s complex business world, there’s a lot of confusion surrounding lease-to-own solutions and financing: What are the differences between them, and which is the better option for your operation? You’re in luck, because we’ve got your answers! Read on.

What Is Financing?

Customer financing is, in today’s retail landscape, a typical payment option. It allows customers to enroll in a payment plan, rather than paying the full price upfront for a big-ticket item like a mattress, appliance or piece of furniture. Like with a credit card, the merchant selling the item receives full payment upfront — with the financing company shouldering the cost.

This means the customer now owes the financer rather than the retailer. Though the customer receives the item right away, the customer doesn’t have to pay for it all at once; instead, the customer is charged interest on the item being financed while paying for the item (or items) over time. Typically, the merchant pays a small fee for each financed transaction.

For merchants, financing can be a great way to convert prospects — customers who are simply browsing the store or casually shopping — into loyal, returning customers.

How Financing Works: A Typical Step-by-Step Process

1. A prospective customer sees a product they’d like to buy, either in store or online.

2. Because the customer wants the product but can't afford to pay the entire price all at once, or doesn’t want to pay the entire price all at once, they apply for financing.

3. The financing provider runs a credit check on the customer to determine whether they’re credit-worthy (that is, they’re trusted to pay off their loan). If the customer is approved, the merchant will receive full payment on the product.

4. The customer receives the product right away, agreeing to reimburse the financing provider on an installment basis. What the payment schedule looks like and how much upfront payment is required will depend on the provider.

5. The customer will have to pay an interest rate, which is how the financing partner profits from the deal. Meanwhile you, as the merchant, will need to pay a small percentage for each financed transaction, just as you would with any other credit card processor.

What Is a Lease-to-Own Solution?

Lease-to-own payment* solutions are an alternative to financing. Acima’s lease-to-own solution allows your customers to shop for the products they need and get them the very same day without paying the full cost in cash or using credit.

Acima approves more customers than traditional financing providers because it considers multiple data points in reviewing customer applications and regularly approves customers with less than perfect credit history.  With Acima, all the customer needs to apply for a lease-purchase application are the following items:

  • An active checking account with at least $1,000 in monthly income

  • Three months of income history with a current source of income

  • A government-issued photo ID and a Social Security number, or a taxpayer identification number

Lease-to-own solutions like Acima provide your business with access to tens of millions of unbanked and underbanked customers—customers who would otherwise slip through your fingers or remain outside of your business’s awareness. In other words, lease-to-own companies like Acima can open the door to more customers, more sales and more business growth.

Are you ready to add Acima’s lease-to-own solutions to your payment solutions mix? Acima’s lease-to-own solutions can empower customers who might otherwise walk out of your store or abandon their online shopping carts. With the versatility of Acima’s lease-to-own options at your back, you can convert many customers who are unable to qualify for traditional financing. If you’re looking to improve your sales today without increasing risk, look into joining the Acima family of businesses today.

Common Questions About Lease-to-Own

Is it a good idea to lease-to-own?

Lease-to-own can be a good option for some people, but it’s not the right choice for everyone. Be sure to weigh the pros and cons of this type of agreement before deciding if it is right for you.

How is leasing different from a credit transaction?

When a person buys something using credit, they are borrowing money from a financial institution. The creditor is the person or company that the person owes money to. The customer has to pay back the money they borrowed, plus any fees like interest.  

When customers enter into a lease agreement with Acima Leasing, they agree to lease merchandise from us. We purchase the merchandise the customers select from a participating merchant and don't extend funds to the customer. The customer makes lease renewal payments to us while using the merchandise, and they can also purchase the property if they want, or terminate the lease at any time, without penalty. There is no interest, but the customer makes manageable lease renewal payments based on the value of the merchandise and our leasing services cost. 

Learn more about Acima Leasing here. Still have questions? Check out our FAQ page.