According to Experian, nearly 30% of Americans have a poor credit score. This means that 1 out of every 3 consumers don’t have access to a credit card, store financing, or personal loans. This is where lease-to-own financing comes in. Also known as rent-to-own or a lease-purchase agreement, this alternative gives store owners the opportunity to help credit-challenged customers get what they need. Let’s review how it works and how it can boost your business.
What is Lease-to-Own Financing?
In lease-to-own financing, the provider purchases the merchandise and leases it to the customer. Agreements last between 12 to 18 months, during which customers make regular payments to obtain ownership of the merchandise. Some companies offer early ownership options to help customers save on their total lease cost.
How Much Does Lease-to-Own Financing Cost?
The total cost of a lease includes the cash price of the merchandise plus taxes, a lease factor, and any applicable fee(s). The lease factor is the assigned ratio that determines your total lease cost. Lease factors vary for a number of reasons but can range from 1.5 to 3.0. Some companies charge a processing fee or require the customer to make a payment at the beginning of their lease.
What Are the Requirements for Lease-to-Own Financing?
Probably the most substantial benefit of a lease-purchase agreement is its’ few requirements. Most lease-to-own financing companies only ask for 3 requirements: 1. Applicants to be at least 18 years old, 2. Have a minimum monthly income between $750 and $1,000 and 3. Have an active checking account. This is what makes lease-to-own so accessible for most customers.
What is the Application Process?
With Snap Finance, customers can complete an online application either on a home computer or in-store on their smartphone. On average the customer can fill out the application and get an answer in less than 2 minutes.
How It Works for You?
When the customer is ready to check out, they’ll be asked to review and sign their lease-purchase agreement, and you’ll receive funds within 24 to 72 business hours after the customer receives the merchandise.
Benefits for the Customer
Simple application process
Easily pay over time
Quickly satisfy their needs
Minimal upfront costs
Benefits for Retail Stores
Boost transactions from credit-challenged customers
Reduce risk from defaulting accounts
Enhance customer satisfaction
Increase funding to reinvest
Generate repeat business
Make Lease-to-Own Financing Work for You
Let customers with poor or no credit history know that you can help them! Most secondary financing companies offer ecommerce and in-store secondary financing solutions, as well as point of sale materials to encourage these customers to visit your store and get what they need. Other companies also offer ongoing marketing efforts to bring in new customers and boost repeat transactions and customer loyalty.
Innovating the fintech industry, Snap Finance helps furniture merchants reach their full sales potential by offering credit-challenged customers flexible financing solutions. Are you interested in learning how Snap can help you boost your online and in-store transactions? Contact Snap at 866-871-0311 or visit snapfinance.com.
Monica Tucker is a senior marketing content writer for Snap Finance and a regular contributor at Furniture World Magazine. Visit www.linkedin.com/in/mtuckercopy to learn more about her and read other articles.