Buy Now, Pay Later vs. Rent-to-Own

Which of these two pay methods offers a better deal?

Buy now, pay later (BNPL) is emerging as a popular payment alternative to credit cards, layaway, and rent-to-own plans. An estimated 60% of Americans have used a buy now, pay later service at least once to make purchases online or in a store.

Rent-to-own, on the other hand, has grown into an $8.5 billion industry, focused primarily on big-ticket purchases like furniture, appliances, and electronics. When comparing buy now, pay later and rent-to-own, here are some key differences to keep in mind.

Key Takeaways

  • Buy now, pay later plans allow consumers to make purchases online or in stores and pay them off in a series of installments.
  • These point-of-sale installment loans may require no credit check to qualify and charge no interest on purchases.
  • Some of the most common BNPL plans include Affirm, PayPal, and Zip.
  • Rent-to-own plans also allow consumers to pay for purchases over time with no credit checks and fast approval.
  • Rent-to-own can mean paying substantially more for purchases compared with buy now, pay later.

What Is Buy Now, Pay Later?

Buy now, pay later refers to a type of short-term financing that allows consumers to pay off purchases in installments and usually without interest. With one of these point-of-sale loans, shoppers make a deposit against their purchases, then pay off the remaining balance in three or more installments spread out over time.

There are a number of platforms that offer buy now, pay later loans, including:

Each of these platforms partners with a variety of major retailers to offer buy now, pay later as a payment option at checkout. The most common purchases include clothing, electronics, furniture, appliances, housewares, and cosmetics.

There's typically no credit check required to qualify for a point-of-sale installment loan, which can make this short-term financing option attractive for people with a limited credit history. Another common feature of BNPL services is the fact that they may come with no interest or fees on purchases.


Though many buy now, pay later services charge no interest, that's not always the case. So be sure to find out up front whether you'll be responsible for interest charges or fees.

What Is Rent-to-Own?

Rent-to-own is an arrangement in which consumers make payments for items with the goal of eventually owning them. This is similar to the way a rent-to-own or lease-to-own agreement to buy a home works.

There are a number of stores that specialize in rent-to-own financing, including Rent-A-Center and Aaron's Rent to Own. They allow people to purchase items then pay for them over time, often with:

  • No credit check
  • Fast approval
  • Low minimum deposits
  • Weekly, biweekly, or monthly payments
  • Payment plans that fit individual budgets

With rent-to-own agreements, consumers aren't borrowing money. Instead, they're agreeing to make rent payments on one or more items for a set period of time. If they make all the scheduled payments in full, the item becomes theirs. But they can also choose to discontinue making payments and return the item to the store.

Rent-to-own plans may require a deposit to get started, though this can be as little as $1, depending on the store or vendor. Many stores also offer free delivery and set up for appliances, furniture, and other large items.


Rent-to-own stores may rent out new items or ones that have been rented previously and returned by customers.

Buy Now, Pay Later Advantages and Disadvantages


BNPL financing can offer some distinct benefits to consumers who use these services. Those include:

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

All of those things can make BNPL attractive, particularly for consumers who may have a limited credit history.

Unlike layaway plans, which require you to pay in full before receiving the items you're purchasing, buy now, pay later plans allow you to take possession of your purchases after making your first payment.


Overspending is one of the biggest drawbacks to using BNPL plans. Among consumers who use point-of-sale installment loans, the average balance owed is $883. Fifty-seven percent of shoppers who use BNPL say they've regretted making a purchase because the item was too expensive. So although these services can offer convenience, there's a price to pay for shoppers who end up overspending.

Buy now, pay later can also be problematic if the buyer can't keep up with the payments. The platforms that offer these loans can charge late fees for missed payments. In a worst-case scenario, they may report borrowers to the credit bureaus, which can cause credit score damage.

  • Take items home right away

  • Flexible payment options and spending limits

  • No credit checks, easy to qualify

  • No additional charges, including interest

  • Easy to overspend

  • Late fees for missed payments

  • Credit score hurt by missing payments

Rent-to-Own Advantages and Disadvantages


Just like a BNPL plan, you can typically get what you pay for the same day you sign up for a rent-to-own plan, which means you don't have to wait until you make the last payment. Therefore, it's possible to be approved the same day and walk out with the items in hand.

Qualifying for rent-to-own financing may be easy if there's no credit check involved or a rent-to-own store accepts shoppers with poor credit.

Rent-to-own payments can be flexible and made to fit your budget. For instance, stores might offer weekly, biweekly, or monthly payment plans. You might have 12, 18, or 24 months to pay off your purchases.


The biggest disadvantage of rent-to-own is how much it can cost. Rent-to-own is a lease transaction, not a credit transaction. In other words, it's not a loan, so there's no interest to pay. But rent-to-own stores can tack on a leasing or rental fee to the cost of your items.

This can make any item purchased through rent-to-own more expensive than it might be if you used BNPL or another form of payment. The total cost you'll pay for an item purchased through rent-to-own should be disclosed in your lease or rental agreement. However, these documents can sometimes be confusing and difficult to read so it may require some digging to understand what the items will actually cost.

Some rent-to-own outlets offer what they call the same-as-cash option. This allows you to pay only the store's cash price for an item, plus applicable taxes. However, that store's cash price may be higher than you could find it elsewhere.

  • Take what you pay for at the time of purchase

  • Easy to qualify, as long as there's no credit check involved

  • Flexible payments

  • Added leasing or rental fees

  • Confusing, wordy documents

  • Price higher than elsewhere with same-as-cash option

The Bottom Line

Compared with rent-to-own agreements, buy now, pay later may be more transparent in terms of how much you can spend and how much you'll pay for whatever you're purchasing. But rent-to-own may give you more time to pay.

When choosing between either payment option, consider how affordable the payments are and what you'll pay in total after any fees or other charges are included. Read up on the best buy now, pay later apps to decide which ones might be right for you. Also consider the benefits of using a rewards credit card to pay instead if you're interested in earning miles, points, or cash back on purchases.

Article Sources
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  1. C+R Research. "Buy Now, Pay Later Statistics and User Habits."

  2. APRO. "The Rent-to-Own Industry," Page 4.

  3. Consumer Financial Protection Bureau. "Should You Buy Now and Pay Later?"

  4. Federal Trade Commission. "Rent-to-Own, Lease-to-Own, Layaway, and Buying Over Time."

  5. APRO. "The Rent-to-Own Industry," Page 23.

  6. APRO. "The Rent-to-Own Industry," Page 27.

  7. APRO. "The Rent-to-Own Industry," Page 22.