Lease-to-Own Options Aid Consumers Amid Economic Headwinds

Lease-to-own options became particularly popular throughout the pandemic continue to aid non-prime consumers amid economic challenges, Katapult CEO Orlando Zayas writes in the PYMNTS eBook, “Endemic Economic: 32 Payments Execs on the ‘Next Normal’ That Never Happened.”

When COVID-19 hit in March of 2020, no one could have predicted the seismic impact that it would have on all aspects of life, especially in the retail and eCommerce areas. As stay-at-home orders took effect, businesses shut their doors and caused millions to lose their jobs and along with them, the income they and their families relied upon, with coronavirus stimulus checks providing partial, but much needed, relief. As life continued, demand for necessary goods such as tires, computers, and furniture increased. In fact, the lifestyle necessitated by COVID-19 made it even more critical to purchase these goods. Alternative payment solutions such as buy now, pay later (BNPL) and lease-to-own enabled those hit hardest by the pandemic to continue to purchase the items they needed, when they needed, for their everyday lives.

Lease-to-own options became particularly popular throughout the pandemic since the solution allowed customers without credit or with lower FICO scores to continue to buy the products they needed flexibly. Katapult found that 34 million consumers, roughly 20% of the U.S. population, obtained durable goods through lease-to-own options last year alone. For retailers that offer lease-to-own options, they can appeal to a broad customer base of previously underserved shoppers.

Unlike other solutions, lease-to-own can be utilized by almost anyone, anywhere, the approval process is quick, and the platforms that exist are easy to use. Additionally, lease-to-own companies such as Katapult prioritize transparency and fairness — there are no hidden fees at checkout and a variety of flexible payment options to choose from during the term of the lease. Plus, retailers in a variety of industries from electronics and furniture to medical equipment providers offer lease-to-own as a payment option, including Wayfair, Lenovo and Purple Mattress. This means that consumers possess a greater degree of choice in their purchases and can obtain higher-quality items.

As eCommerce exploded over the last two years, lease-to-own providers such as Katapult adapted to the digital space to support merchant partners and help facilitate the boom in retail, ensuring that consumers could continue to obtain the items they needed from the comfort of their homes. Retailers that offered lease-to-own options saw higher repeat purchase rates and greater customer satisfaction rates, encouraging them to promote the solution to more consumers and perpetuating the cycle of use.

Today, as COVID restrictions lift and the world starts to shift to a post-pandemic state, lease-to-own options continue to aid non-prime consumers as residual economic issues including supply chain shortages and sky-high inflation increase the price of necessary goods such as rent, gas and food. These price hikes have an outsized impact on those already living paycheck to paycheck, squeezing their income further and making it harder to buy the staples that they rely on for everyday living. Lease-to-own helps these consumers stretch their earnings through flexible options to ownership and a customizable plan that meets their individual needs. As the world evolves, lease-to-own will continue to be a viable option for consumers in all financial situations, especially non-prime consumers, for purchasing essential goods.