BUSINESS SPEAK · LTO
LTO: Lease-to-own
Rent an item with a contractual path to owning it.
What it means
LTO, or lease-to-own, is an agreement where rental payments can lead to ownership after the required payments and any final buyout. It is also called rent-to-own; the exact ownership terms are set by the contract.
Where you’ll meet it
- Often offered for furniture, appliances, vehicles or equipment. A low weekly or monthly payment can hide a high total cost.
- Early purchase, cancellation, repairs and missed payments can change what you pay or whether you acquire ownership. Compare the full agreement with the cash price.
Worked example
Scenario: The cash price is 1,000. The deal asks for 100 upfront, 24 payments of 60, a 50 ownership payment and 10 in fees.
- Rental payments: 24 × 60 = 1,440
- Total: 100 + 1,440 + 50 + 10 = 1,600
- Above cash: 1,600 − 1,000 = 600, or 60%
Answer: Completing the deal costs 1,600: 600 more than buying outright.