What is lease to buy, and how is it different from rent to buy?
|August 27, 2010||Posted by Sandie under Rent2Buy Concept|
The term lease to buy sounds a lot like rent to buy or rent to own. These three types of transactions are in fact quite different. In previous blog posts, we’ve defined both rent2buy and rent to own, and explained how these two processes differ. The following characteristics are what make lease to buy unique:
Lease. Lease to buy involves a monthly payment made over a long period of time. A typical amount of time for the lease period in this type of transaction is 2 or 3 years.
Final balloon payment. Lease to buy is a financial transaction with a final balloon payment. At the end of the lease, you make a balloon payment and then you own whatever you were leasing.
The main distinction that must be made between rent to buy and lease to buy is how each contract is resolved. With rent to buy, you can choose to buy or not to buy at the end of the rental contract. With lease to buy, you make a final balloon payment at the end of the lease period and you then own whatever you were leasing.