Deciding between leasing and purchasing over time isn’t always straightforward. Learn how each option works, and what to consider based on your budget and credit history.

Key takeaways

• Qualifying for a lease-to-own agreement vs. purchasing over time will come with different criteria

• Lease-to-own is an opportunity to rent merchandise without the commitment of buying. It also helps businesses serve more customers as leasing is generally available to people with less-than-ideal credit.

• A purchase is simply a transaction to buy property or merchandise. It can be a one-time, upfront payment, or the buyer can use options to pay over time.

• Use online calculators to compare fees, interest, and payment terms so you can choose what works best for you.

Understanding lease vs. purchase

Lease-to-own financing is typically available on durable goods, such as furniture, mattresses, and tires.

For example, if you lease a washing machine, make all payments and satisfy the contract terms, you own the appliance. Until then, the finance company is the legal owner of the washing machine and allows you to use it in return for lease payments. Lease agreements are legal contracts.

Lease-to-own is an opportunity to rent merchandise without the commitment of buying. It also helps businesses serve more customers as leasing is generally available to people with less-than-ideal credit.

A purchase, however, is simply a transaction to buy property or merchandise. It can be a one-time, upfront payment, or the buyer can use options to pay over time.

What to consider when leasing vs. purchasing over time

When weighing your options to lease or purchase over time, there are a few things to consider. Your monthly income is going to be a large determining factor, as well as any available savings to cover initial fees and a down payment.

You should also know your credit score, as it will be important, whether applying for a lease or financing a purchase.

Here’s what to consider when making your decision.

Monthly cash flow. Leasing may mean paying a lower monthly payment than when financing a purchase. In addition, most lease agreements require a smaller down payment or often no down payment, which can be helpful if you can’t or don’t want to dip into savings. When financing a purchase, you’ll typically need a down payment of 10% to 20%.

Fees and interest. Before making the decision to sign a lease agreement, ask about additional fees and costs. The exact terms of a lease are a bit different than a traditionally financed loan, and usually include fee considerations include sales tax, final payment amount, and origination fee. When purchasing over time, you’ll pay interest, which is usually an annual percentage of the amount of the loan.

Flexibility. When you lease merchandise, you’re not tied to a long-term loan for a big-ticket item. For your personal situation, it may make sense for you to sign a short-term lease for furniture, jewelry, or other merchandise. But purchasing over time may give you more flexible terms as well as long-term enjoyment of the goods.

Credit history. Applying for a lease or loan have different credit requirements. Some lenders will work with borrowers who have a lower credit rating, while others may not. Many lease-to-own financing options are available to all credit types. Be open to options to lease and purchase over time and find the best solution for you.

Pros and cons of leasing vs. purchasing over time

While there are benefits to leasing and purchasing over time, there are also some drawbacks you should be aware of. Take all these things into consideration to make the most informed decision possible.

The benefits of leasing include:

• Lower monthly payments

• Flexible timeline

• Little to no down payment

• Ability to “try before you buy”

• Accessible financing

When compared to financing a purchase, leasing often involves a higher overall cost and may have usage restrictions or limitations. In addition, not all merchandise is available to lease.

The benefits of purchasing over time include:

• Rights of ownership

• Lower overall cost

• Long-term investment

• No ownership restrictions

There are some drawbacks to purchasing. A sizable down payment may be required and you may need to manage larger monthly payments.

Run the numbers

To find out if leasing is better than purchasing over time for you, start by running some numbers. A quick online search will produce results for helpful lease vs. purchase calculators. This will help you compare the rates side-by-side as well as figure in depreciation, lease fees, and interest rates.

In the end, the decision will come down to your budget, credit history, and lifestyle needs. Weigh the pros and cons of leasing vs. purchasing to make the right decision for you.

Where can I get a lease?

There are many companies that offer lease agreements, depending what you’re shopping for. Furniture stores, mattress shops, jewelry dealers, and other retailers may offer lease options in addition to credit and cash programs.

When looking at leasing options, it’s important that you feel comfortable with the terms of the contract. If something feels off or you can’t get answers about specific questions, you should be wary of signing the agreement and look for other providers. Understanding leasing will help as you consider the many options available in the marketplace.

Snap Finance offers lease-to-own financing for furniture, mattresses, jewelry, and other durable goods. Snap helps customers with low credit scores get the items they need now and pay later with plans that work with their budgets.¹

Interested in learning more? Here’s how it works.

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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.

¹Not all applicants are approved. While no credit history is required, Snap obtains information from consumer reporting agencies in connection with submitted applications, and your score with those agencies may be affected.