Lease-to-Own (LTO) has afforded you the option in the past to expand your customer base to new market segments. In the wake of the COVID-19 pandemic, LTO may now be necessary to allow you to continue servicing your existing customer base. Why? Because an April 2020 survey found that one-in-four credit card holders said their lenders had reduced their credit limit, closed their card altogether or both within the past last month (April 2020).
JPMorgan Chase research estimates that, overall, 65% of families lack a sufficient cash buffer to weather an event like COVID-19. So, what happens when your customers need the products you offer but no longer qualify for other credit options? Offering LTO may mean the difference between retaining or closing the sale for customers you’ve worked hard to earn business from in the past.
Because this may be the first time you have had to consider LTO options, we wanted to turn to some of the experts in this space to help you get familiar with LTO. Below you’ll find a Q&A with a few of Nationwide’s vendor partners: Uown Leasing, Kornerstone Credit and American First Finance (AFF).
Independent Thinking: What does it cost to offer LTO products to your customers?
Uown: There is no cost to the retailer to do business with Uown Leasing.
Kornerstone: There are no fees or costs for retailers who offer Kornerstone.
AAF: AFF offers Nationwide Members a 0% merchant discount fee.
Are there any benefits to being on the Nationwide program?
Uown: Uown provides exclusively to Nationwide Members a program with a 1% rebate on funded transactions.
Kornerstone: Yes, our Nationwide-exclusive benefits include a discounted initial payment for consumers, 0% discount to the retailer and a 1% rebate to the retailer.
AAF: AFF offers exclusive to Nationwide Members a 0% dealer cost and a 1% rebate program from the first transaction.
Are touchless transactions, such as text-to-apply or online applications, available?
Uown: The application process at Uown Leasing is paperless and can be completed online. During the slow-down caused by COVID-19, Uown made the decision to invest in a significant technology overhaul that will be rolled out in late Q3 2020. This will include text-to-apply, an enhanced e-sign and document delivery system, and significant enhancements to our Merchant Dashboard.
Kornerstone: Yes. Kornerstone Credit offers both. We send out regular emails to our partners with their text-to-apply code and application link, and these resources are also found in the marketing/advertising area of their Kornerstone Credit Retailer Portal.
AAF: AFF offers a variety of touchless options to help close a sale, including Text 2 Apply paperless transactions and e-commerce solutions, regardless of a retailer’s volume.
Can consumers help rebuild their credit by using your LTO product?
Uown: Yes. Uown reports payments to Transunion, one of the big three credit bureaus. Making on-time payments can help rebuild the consumer’s credit.
Kornerstone: Paid-in-full letters can be sent to a credit bureau for reporting. If the bureau accepts the transaction record, it may positively affect a consumer’s credit.
AAF: AFF reports activity to Transunion, which may help a customer’s positive payment history.
What types of merchandise are eligible for financing?
Uown: The primary merchandise you can finance with Uown Leasing is furniture, mattresses and appliances. However, other items are approved for Nationwide Members.
Kornerstone: We have lease-to-own programs to fit different merchandise categories. Our primary categories are furniture, appliances, mattresses and tires.
AAF: AFF offers a bank installment loan, which allows financing of all products and services, excluding titled items/vehicles, guns, etc.
How is lease-to-own different than a credit transaction, financing or a loan?
Uown: A lease provides the customer with the ability to exit the transaction if something changes in their situation without a negative impact to their credit. If the customer is current on the lease and they determine that they no longer want or can afford the leased items, they can request to have the items picked up and the lease ended. That is not an option under the other transaction types.
Kornerstone: A lease-to-own program allows the consumer to apply without a hard credit check and sets them up with affordable leasing payments over time, corresponding with their pay day. Unlike traditional credit, a consumer can buyout the lease early or return the product to end the lease and future payments, without affecting their credit score.
AAF: A lease is only good for a product that can be returned, and the customer can ask out of their lease by returning the item to the leasing company. Customers do not own the merchandise until they have fulfilled their lease agreement. Bank installment loans are similar to any other type of loan. The customer has day one ownership, which is why services can be included in loan agreements, and down payments are permitted.
What is meant by “No Credit Needed”?
Uown: No Credit Needed is a statement that means there is no FICO-based cutoff for granting credit. While some lease-to-own vendors still use services that pull the FICO score, they do not have a cutoff that says the customer has to have a certain number to obtain a lease. With Uown Leasing, there is absolutely no credit check with the big three credit bureaus.
Kornerstone: Kornerstone’s decision process isn’t based on a credit score, so no hard credit pull is done on a consumer. There is a soft information pull, so we can verify identity, but it won’t affect a consumer’s credit score.
AAF: No Credit Needed means that a customer can get approved regardless of their credit score. We look at a wide variety of information during our decision process, and the customer’s credit score being just one of many factors. AFF routinely approves customers with low to no FICO history.
What is the average length of time consumers take to pay off a lease?
Uown: The average consumer using Uown Leasing pays off their lease in three to six months. This takes advantage of a discount to pay early with absolutely no penalty.
Kornerstone: Most consumers pay on either the 90-day buyout term or the full 12-month leasing term.
AAF: Over 70% of all AFF customers have fulfilled their lease/loan agreement by their seventh month with our program.
Nationwide recognizes that not only are your customers facing challenges in today’s “new” world, but you also are having to reevaluate how you do business. If we can help you understand the LTO option better, reach out to Megann Hayes McDaniel at 318-213-3097 or firstname.lastname@example.org.
Megann McDaniel is director of financial services for Nationwide Marketing Group.