Buy now, pay later vs. leasing with option to buy

Buy Now, Pay Later (BNPL) is emerging as a popular payment alternative to credit cards, layaway plans, and option-to-buy rental plans. An estimated 60% of Americans have used a shop now, pay later service at least once to make purchases online or in a store. Meanwhile, option-to-purchase leasing has grown into an $ 8.5 billion industry, focused primarily on expensive purchases like furniture, appliances, and electronics. When you compare buy now, pay later, and rent with the option to buy, here are some key differences to keep in mind.

Key points to remember

  • Buy Now, Pay Later plans allow consumers to make purchases online or in-store and pay for them in installments.
  • These point-of-sale installment loans may not require a credit check to qualify and charge no interest on purchases.
  • Option-to-buy rental plans also allow consumers to pay for their purchases over time without a credit check and quick approval.
  • However, leasing with an option to buy can mean paying a lot more for purchases compared to buying now, paying later.

What is Buy Now, Pay Later?

Buy Now Pay Later refers to a type of short-term financing that allows consumers to pay for their purchases in installments and usually without interest. With one of these point-of-sale loans, buyers make a deposit on their purchases and then pay off the balance in three or more installments over time.

There are a number of platforms that offer Buy Now, Pay On Back loans, including:

Each of these platforms is partnering with a variety of major retailers to offer buy now, pay later as a payment option at checkout. Typically, no credit check is required to qualify for a point-of-sale installment loan. This can make this short term financing attractive to people with limited credit history.

Buy now, pay later, the services also do not charge interest or fees on purchases. The most common immediate purchases and subsequent purchases include clothing, electronics, furniture, appliances, housewares, and cosmetics.


Unlike layaway plans, which require you to pay in full before you receive the items you buy, buy now, pay later allows you to take ownership of your purchases after you make your first payment.

What is leasing with an option to buy?

Leasing with an option to buy is an arrangement in which consumers make payments for items with the intention of eventually owning them. This is similar to how a lease with option to buy or lease with option to buy a home works.

There are a number of stores that specialize in buy-to-buy lease finance, including Rent-A-Center and Aaron’s Rent to Own. They allow people to buy items and then pay for them over time, often with:

  • No credit check
  • Fast approval
  • Low minimum deposits
  • Weekly, bi-monthly or monthly payments
  • Payment plans to fit individual budgets

With option-to-buy lease agreements, consumers don’t borrow money. Instead, they agree to pay the rent for one or more items for a specified period. If they make all scheduled payments in full, the item becomes theirs. But they can also choose to stop payments and return the item to the store.

Option-to-buy rental plans may require a deposit to start, although it can be as little as $ 1, depending on the store or vendor. Many stores also offer free delivery and installation of appliances, furniture and other bulky items.

To note

Option-to-buy rental stores may rent new or previously rented items returned by customers.

Buy now, pay later Pros and cons

Buying now, paying later, financing can offer distinct benefits to consumers who use these services. These include:

  • Be able to receive the items now and refund them over time
  • Flexible payment options
  • No credit check to qualify
  • Flexible spending limits
  • No interest charges on purchases (generally)

All of these things can make BNPL attractive, especially to consumers who may have a limited credit history. But there are some downsides to consider, starting with the potential for going over budget.

Among consumers who use point-of-sale installment loans, the average balance owing is $ 883. Fifty-seven percent of buyers who use Buy Now, Pay Later say they regretted making a purchase because the item was too expensive. So while these services can be convenient, there is a price to pay for buyers to end up overspending.

Buying now, paying later can also be problematic if the buyer can’t keep up with payments. Platforms that offer these loans may charge late fees for missed payments. In the worst case, they can report borrowers to the credit bureaus, which can damage the credit rating.


Although many buy now, pay later, the services charge zero interest, this is not always the case. So make sure you know up front whether you will be responsible for any interest charges or fees.

Advantages and disadvantages of leasing with an option to buy

Option-to-purchase lease agreements share some similarities with buy-it-now and pay-out plans. For example, you can usually get the items you buy the same day you sign up for a lease with option to buy plan. You don’t have to wait for items to be fully paid for, like you would with a layaway plan.

Qualifying for lease finance with an option to buy can be easy if there is no credit check or if a hire store accepts buyers with low credit. It is possible to be approved the same day and leave with the items in hand.

When it comes to how opt-to-buy lease payments work, they can be flexible and fit your budget. For example, stores may offer weekly, bi-monthly, or monthly payment plans. You might have 12, 18, or 24 months to pay for your purchases.

The biggest downside to leasing with an option to buy is the cost. Renting with an option to buy is a rental transaction, not a credit transaction. In other words, it is not a loan so there is no interest payable. But option-to-buy rental stores may add a lease or rental fee to the cost of your items.

This can make any item purchased on hire purchase more expensive than if you were used to buying now, paying later, or using another form of payment. Aaron’s website, for example, states that “your total cost of ownership will be greater than the retail price.”

The total cost that you will pay for an item purchased on hire-purchase must be stated in your lease or rental agreement. However, at times these documents can be confusing and difficult to read, so it may be necessary to dig to understand what the articles will actually cost.


Some option-to-buy rental stores offer an “same as cash” option, which allows you to pay only the store’s cash price for an item, plus applicable taxes. However, the cash price of this store may be higher than what you might find elsewhere.

The bottom line

Compared to option-to-buy lease agreements, buy now, pay later can be more transparent in terms of how much you can spend and how much you’ll pay for anything you buy. But leasing with an option to buy may give you more time to pay. When choosing between either of the payment options, consider the affordability of payments and what you will pay in total after factoring in fees or other charges. Learn about the best buy now, pay for apps later to decide which ones might be right for you. Also consider the benefits of using a rewards credit card to pay instead if you want to earn miles, points, or cash back on purchases.

About Marilyn Perkins

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