It’s a common scenario: a customer is shopping but doesn’t have all the funds on hand to pay for the purchase upfront. You may try to resolve this by offering your own in-store credit option. But by going this route exclusively, you could miss out on sales and lose a significant and often overlooked customer base.
The reason? Your credit-challenged consumers will likely have a hard time getting approved for in-store credit. These consumers include those with poor credit or those with little to no credit history – and they make up a significant portion of the American population.
Fortunately, there’s a way to prevent these missed opportunities – lease-to-own financing. Through this alternative financing solution, you can capture more sales and yield incredible results for your business.
What Is Lease-to-Own Financing?
A lease-to-own option is not credit or a loan. Instead, a lease-to-own finance company purchases the merchandise from the merchant, and then leases the merchandise to the customer. The customer takes the merchandise home and makes lease payments over time until they have made enough payments to obtain ownership.
Even better, the merchant doesn’t have to take on the risk that could come from a customer defaulting on payments. Lease-to-own creates an arrangement between the consumer and the financing provider. If a customer defaults, the provider takes the hit – not the merchant.
The Benefits of Lease-to-Own Financing
Lease-to-own financing can have a significant impact on your bottom line. It can turn missed opportunities into closed sales and dissatisfied shoppers into loyal customers. Here are three powerful ways lease-to-own financing could give your business a boost:
A recent report from Oliver Wyman found that 28 million adult Americans are credit invisible, and 57 million have subprime or below credit scores. That’s a total of 85 million people who could benefit from an alternative financing solution. By providing lease-to-own financing in your store, you can give those who have poor credit, little to no credit, or who don’t want to rely on credit cards a chance to get what they need when they need it.
To qualify for lease-to-own, the applicant typically has their credit report pulled from special providers and not from the three major credit bureaus (Experian, TransUnion, and Equifax). Additional data, such as monthly income and having an active checking account, is also looked at, increasing the likelihood of approval. This allows you to reach a significant customer segment who want your product but can’t afford to pay for it in a single transaction.
Lease-to-own financing gives customers the power to make purchases that otherwise would not fit their budget while offering a repayment schedule that coincides with their paydays. When your customers no longer have to pay for everything in one lump sum, it could motivate them to go for a higher ticket item or to add on additional items. This means more closed sales at higher amounts – a win-win for your business.
In addition to bringing in new customers and more sales at higher amounts, offering a lease-to-own financing option in your store can also drive repeat business, according to a study done by the Federal Reserve Bank of Kansas City. Lease-to-own empowers your customers financially and creates an opportunity for them to afford big ticket items. This can go a long way in increasing customer loyalty and retention. A lease-to-own company like Snap Finance even markets directly to your customers through their Snap EDGE program, encouraging them to come back to your store for more.
For higher traffic, more sales, and greater revenue, shop owners would be wise to provide a lease-to-own financing option to their customers. If you’re ready to gain a competitive edge and reap the benefits of lease-to-own, click here to learn how partnering with Snap Finance can take your business to new heights.
This article is part of the SNAP! Finance series. As more articles are released, they can be found below:
Advance Your Business with Text-to-Pay and Online Payment Portals
Selling 101: What it is, what it does, and how it helps YOUR business
The Advantages of Alternative Financing Solutions Across Automotive
Options for Payment and Payment Methods
The views and opinions expressed in this piece do not necessarily reflect those of 10 Missions Media and its associated brands.