Real Estate News, Reviews and Investment
Article: typical terms of a lease-to-own agreement.
A lease-to-own agreement allows the renter to purchase the asset leased at the end of the agreement period. Typically, part of the fee is used to offset the cost of the asset.
Lease-to-own agreements are common where governments are trying to encourage home ownership, and are also common among businesses offering company cars.
An example would be a business that offers an employee a company car provided they contribute towards the cost. At the end of a set period, the employee has the opportunity to purchase the car at a discounted rate, having already made payments against it through the lease fees. However, if the employee leaves the company before the purchase point, they will not be able to buy the car at that price.
Premium costs and option to buy
Lease-to-own agreements are typically more expensive than standard rental agreements, even where subsidized by local governments. They grant the renter the option to buy the item at a fixed price at the end of the agreement period.
When are lease to own agreements offered?
Some governments and financial institutions offer lease-to-own agreements as a way of encouraging people with low incomes and poor credit ratings who are unable to get a loan from mainstream financial institutions to become property owners.