Lease-to-own vs. credit cards: Which saves you money?
When you need to make a big purchase but can’t pay all at once, credit cards and lease-to-own financing offer ways to pay over time. Each has pros and cons depending on your credit situation, financial goals, and desire for flexibility or structure.
Key takeaways
Lease-to-own offers predictable payments and clear terms. You’ll know your payment amount and schedule upfront.
Credit card interest can add up. A 0% APR promotion or making a full payment within the billing cycle can minimize added costs.
If using a credit card isn’t an option, Snap’s lease-to-own financing may help you get what you need now.
If you’ve got a big purchase coming up and not a lot of cash to pay upfront, you have choices, including using lease-to-own financing or a credit card. Both can help you get what you need now and pay over time, but they work very differently.
But do they save you money? No. No matter how you choose to pay over time, you will likely pay extra interest or a cost of lease to the financing provider. But the convenience may outweigh those costs for you.
Keep reading to learn more about how credit cards and lease-to-own financing work, and the pros and cons of each.
What is lease-to-own financing?
Whether you’ve heard it called lease-to-own, rent-to-own, or lease-purchase, the concept is essentially the same. Lease-to-own financing is typically available on durable goods, such as furniture, appliances, electronics, mattresses, and tires.¹ In a lease-to-own agreement, the merchandise is generally available immediately or quickly delivered, making it a convenient option for essential items, such as appliances, that are hard to live without.
Snap Finance is a leading provider of lease-to-own financing. In a lease-to-own agreement with Snap Finance, Snap purchases the merchandise from the retailer and then leases the merchandise to you, the customer.
As part of your agreement, you make payments over time to Snap. Once you make all your payments and have completed the terms of your lease agreement, you obtain ownership of the merchandise and it’s yours.
Here’s what you should know about lease-to-own financing:
Fixed terms and predictable payments: You will make regular, fixed payments over a set period. With most lease-to-own providers, including Snap Finance, you can choose to buy out your lease early and save on overall lease costs.²
Ownership: When you complete your lease, including all required payments, the item is yours.
No revolving debt: Lease-to-own financing is not a line of credit like a credit card.
Approvals: Many providers offer no-credit-needed financing and consider more than your credit score. For example, all applicants are welcome to apply for Snap Leasing, including those with limited or poor credit.³
Snap Finance is accepted at thousands of partner stores across the U.S. Whether you’re looking for pay-over-time furniture options, mattresses, electronics, appliances, or wheels and tires, the Snap Finance Store Locator makes it easy to find participating retailers online or near you.¹
How do credit cards work for big purchases?
Credit cards are revolving credit with a credit limit, which is the maximum amount you can charge on a credit card. Unlike traditional loans and lease-to-own financing, credit cards do not have a set repayment term and can be used repeatedly as long as the minimum payment is paid within the billing cycle.
For big purchases, credit cards provide flexibility in terms of payment options. When you buy something, you can pay it off right away or carry a balance. Interest applies to any unpaid balance after your grace period.
Here’s what you should know about credit cards:
Interest charges: If you don’t pay your full statement balance, interest starts adding up. Average credit card APRs have been above 20% in recent years for many users, and higher for those with lower credit scores.
0% APR promos: Some cards offer 0% APR for a set period on new purchases. If you qualify and pay off the balance before the promo ends, you can save on interest.
After the promo: When the intro period ends, the APR will likely jump to the regular rate. Any remaining balance starts accruing interest at that higher rate.
Minimum payments: Cards let you pay a small minimum. That’s flexible, but it can stretch your payoff time and raise total interest charges if you only pay the minimum.
How do approvals compare for lease-to-own financing vs. credit cards?
Credit card approvals
If you have a low credit score, you may not be approved for a credit card or be eligible for the best interest rates or rewards programs.
However, if you use your credit card responsibly and make timely payments, it can help improve your credit score over time. This is because credit card companies report payment activity – good and bad – to the three major credit bureaus: Experian, TransUnion, and Equifax.
In addition to purchasing power and building credit, credit cards also offer various benefits, such as cashback rewards, airline miles, and discounts on specific purchases. These perks can add up and provide additional value for cardholders. Keep in mind that eligibility for these perks may be more readily available to cardholders with good or excellent credit scores.
Lease-to-own financing approvals
Traditional financing, including credit card providers, looks primarily at your credit score when you apply. But most lease-to-own financing companies, including Snap Finance, look at multiple factors to determine your creditworthiness. That could mean that even if you’ve been turned down for traditional financing because of less-than-perfect credit, you may be considered for Snap’s lease-to-own financing.²
Does Snap Finance help build credit? The short answer is no. Using Snap Finance lease-to-own financing does not directly help you build credit because Snap does not report your on-time payments to the major credit bureaus. However, Snap’s lease-to-own financing can be a helpful tool to help get you essential items while you work on improving your credit through other means.
How it works: Lease-to-own vs credit cards
Let’s compare how it works with a simple example: a $1,200 furniture purchase.
How Snap’s lease-to-own financing could look for you:
Clear total cost: Lease-to-own plans lay out your regular payment and term up front. You’ll know the total of all payments if you use Snap’s Maximum-Term Plan of 12-18 months.² Keep in mind that with the Maximum-Term Plan you may pay more than twice the price of the retail goods, plus applicable taxes and fees.
Early ownership options: You could save significantly on your cost of lease amount by making all regular payments on time and paying the required amount before the end of the maximum term, including any early buyout promotions. You must schedule an early ownership option.² This could keep your total cost closer to the sticker price.
Predictable payments: Your payment amount won’t change month to month.
How using a credit card could look for you:
If you pay your purchase off quickly: If you pay the $1,200 off within the billing cycle or use a 0% APR promotional card, you could pay close to the sticker price.
If you pay it off slowly: The average interest rate on new credit card offers is 24.35%. Carrying a balance over many months adds interest. For example, paying just the minimum required each month at 24% APR would take years to pay off and cost hundreds in interest.
When lease-to-own financing may work for you
Lease-to-own financing works well in several situations, especially when you’re shopping for durable goods, such as tires, furniture, or appliances.
If you don’t qualify for a credit card or other financing, lease-to-own financing can help you get big-ticket items you need now. If you need no-credit-needed financing because you’re rebuilding your credit or establishing credit for the first time, lease-to-own financing may be an option for you.
It’s also an option if you prefer to have a clear payoff plan, with fixed payments, a set end date, and early ownership options that can save you money. And if you want to avoid long-term revolving debt, as the closed-end plan finishes when payments are complete, helping you maintain better control over your spending.
Answering common questions about lease-to-own financing
Is lease-to-own financing expensive?
The total cost of a lease, including the cash price of the item plus a fixed cost of lease, will often exceed the item’s original cash price. However, lease-to-own financing breaks the cost into smaller payments that may be a better fit for your financial situation. For many households, the ability to pay over time is more manageable than paying the full amount upfront.
Do you pay interest with lease-to-own financing?
The cost structure for lease-to-own financing is different from traditional loans, which charge interest. Instead, lease-to-own financing uses a predetermined cost of lease on top of the item’s original price.
Will Snap Finance lease-to-own financing help my credit?
No. Using Snap Finance lease-to-own financing does not directly help you build credit because Snap does not report your on-time payments to the major credit bureaus.
What can I get with Snap Finance lease-to-own financing?
Lease-to-own financing from Snap is available on durable goods, such as furniture, appliances, mattresses, tires, and more. Go to the Snap Finance website for more information.
The advertised service is a lease-to-own agreement provided by Snap RTO LLC. Lease-to-own financing is not available to residents of Minnesota, New Jersey, and Wisconsin.
¹Some restrictions may apply on leasable auto parts, electronics, or sporting goods. Please check with merchants for details.
²The default payment plan is the Maximum-Term Plan, which includes 12- to 18-month renewable terms and is your highest cost option. To exercise an early ownership option, including any early buyout promotions, you must make all regular payments on time and ensure the required amount is paid within the applicable timeframe through the customer portal or by contacting Customer Care at 1-877-557-3769. Early buyout promotions may include a cost of lease above the merchandise price. For details and limitations, including relating to applicable early ownership options, refer to your lease agreement.
³Not all applicants are approved. While no credit history is required, Snap obtains information from consumer reporting agencies in connection with applications, and your score with those agencies may be affected.