How Does Sprint Make Money Off Leased Phones

Should You Lease or Buy Your Next Smartphone?

Yous've got more options than ever for buying a new smartphone, including one pick in which you lot don't really buy your phone at all.

In addition to the traditional methods of ownership a lower-cost, subsidized smartphone in exchange for signing a two-year contract or paying off the total cost of your device outright in the grade of monthly installments, y'all tin also lease your device from almost carriers. Simply sign a lease deal, and in exchange for a low monthly payment, you get a phone you can use, plus the pick to upgrade at any time. Just keep paying the apartment monthly fee, and you can plow in your old telephone for a new i every 12 months. One carrier fifty-fifty lets you swap phones upward to three times per yr.

Both Dart and T-Mobile offering leasing options aslope their pay-to-own equipment installment plans (EIP). And while neither AT&T nor Verizon offers leasing options — yet — phone makers are getting into the leasing business, too. Apple became the first hardware vendor to offering leasing of its phones last fall, and ZTE followed suit with a program of its own. Samsung is reportedly mulling over a leasing programme for its smartphones.

Is leasing your adjacent phone a smart decision? It potentially is, if y'all plan on upgrading a lot. But leasing your phone adds a few risks you need to be aware of before y'all brand a decision.

Quick Tips

If yous're in a hurry, here are the most important things to consider when deciding whether to lease a smartphone. We explore these in greater particular below.

You own your phone when yous buy information technology under an equipment installment plan (EIP). At the terminate of a lease agreement, however, you accept to render the telephone, buy out the remaining balance or upgrade to a new model.
Consider leasing if you like to accept a brand new phone every year.
Most EIPs offer early upgrade options, likewise, though you'll have to pay off your electric current device first.
Monthly payments are slightly lower if you lease your telephone rather than buying it on an installment programme.
If you lot're happy using the same phone for 18 months or longer, buy it through an EIP (or buy information technology outright if you don't listen the larger upfront payment).

More: The All-time Cellphone Plans for Families and Individuals

Leasing vs. Equipment Installment Plans: How they're different

You might recollect leasing and EIPs await similar, as both are congenital effectually monthly payments for a stock-still term. There's i major difference, though: With an EIP, at the end of two years, you own your phone. In one case the device is paid off, you can keep to use information technology with no additional monthly hardware costs, or you can sell your telephone to finance a new model. With a charter, the monthly hardware costs are continual.

A 32GB Samsung Milky way Note 5 from Dart costs $25 a month if you lease, merely ownership via an EIP raises the payment to $30.80

Those monthly payments tend to be lower for a charter understanding than with an EIP, just every bit they are usually lower over the short term when you lot rent instead of buy. In the instance of phones, with an EIP, you pay a petty more each month, considering y'all're paying off the phone. For example, a 32GB Samsung Galaxy Note v from Dart costs $25 a month if you lease it, but buying the phone via an EIP raises the monthly payment to $30.80. Trading in your electric current phone for a leased device can mean even lower monthly payments at some carriers, and the newer the telephone, the lower the monthly payment.

Spread that savings out over ii years, and y'all can walk abroad with a nice chunk of change after having leased your device. Have Sprint's leasing program for an iPhone 6s. You'd pay $26.39 a calendar month for xviii months and exist eligible to upgrade to a new phone after a year. In contrast, with Dart's Easy Pay EIP, y'all'd pay $27.09 per month for that same phone, plus a $10 monthly charge if you desire to upgrade early on. (Sprint also charges $10 a calendar month on 24-calendar month leasing agreements if you lot want to upgrade early.) That means after a year, when y'all're eligible to upgrade, y'all'd take paid $445.08 for your iPhone 6s through Like shooting fish in a barrel Pay, compared to $316.68 if you'd leased the phone.

And that'due south the primary appeal to leasing: Simply pay a regular monthly fee in perpetuity, and you e'er go to show off the about current superphone. Most leasing deals permit you update before the two-twelvemonth lease is up. T-Mobile lets you update upwards to three times a year, for instance. Early update opportunities and costs vary wildly with EIPs, but most require you to await at least six months or to pay off at least half the cost of your old phone before you can get a new one.

Leasing a phone is pretty easy to empathize, particularly in contrast to the upgrade conditions you take to wade through with an EIP. Then it's easy to come across how leasing has become so popular. In 2015, more one-half of Dart'southward customers who financed their devices –– in other words, customers who didn't pay the total price of a phone up forepart or sign on for a two-year contract — were iv times more likely to lease their devices than purchase them through an EIP. And these lease numbers accept risen consistently since Sprint originated the lease thought with its iPhone for Life program in September 2014.

"Leasing… [i]s a bit more transparent, in that the consumer knows how much he or she owes," said Ramon Llamas, research manager and marketplace research firm IDC. "And it'south not so much a shell game [as are] subsidized smartphones."

Simply Llamas likewise has a alarm: "Like all leases, have a good look at the fine impress to understand the conditions and limitations that apply."

Leasing Is Kind of Like a Contract, But for Hardware

That alarm is audio advice. Despite the seeming simplicity and the outward advent of a lower cost, most leasing plans involve a dizzying number of weather and options, including the requirement to trade an "eligible" device to get the best deal.

"Cypher has changed — only the names accept changed. You've merely exchanged iron shackles for gold shackles." – Roger Entner, Recon Analytics

A 32GB Samsung Galaxy Note 5 from Sprint costs $25 a month if you lease it, but buying the phone via an EIP raises the monthly payment to $30.80. Credit: Jeremy Lips / Tom's Guide — (Image credit: A 32GB Samsung Galaxy Note v from Sprint costs $25 a calendar month if you lease it, only buying the phone via an EIP raises the monthly payment to $30.80. Credit: Jeremy Lips / Tom's Guide)

More importantly, you should understand the delivery leasing entails. If you want to preserve that ability to regularly upgrade to new phones, you've got to stick with your current carrier. Equally a result, you lot could actually finish upwards spending more money over time by leasing than past buying through an EIP.

"Instead of a service contract, now yous take a handset contract," said Roger Entner, an analyst at Recon Analytics. "You're paying for [your telephone] one way or another. Cipher has inverse — only the names. You've simply exchanged iron shackles for aureate shackles."

MORE: Cellphone Insurance: The Best and Worst Plans

That'southward ane of the reasons carriers have embraced leasing: Consumers seem to be ownership fewer phones. Before EIPs became popular in 2015, people bought new phones on average every 21.4 months, Entner calculated. With EIPs now dominating the phone-financing field, people are buying a new phone only one time every 27 months.

If y'all're in a lease, phone sellers effigy you'll buy a phone more often and will be less likely to switch carriers or brands. "Carriers are in a never-catastrophe quest to (a) continue their subscribers and (b) steal subscribers from everyone else," IDC's Llamas said. "Leasing plans like these are a way to practise just that."

That'south skillful for carriers and phone makers, but it may not be in the best interests of customers' wallets. Monthly lease payments that are lower than EIPs make it announced y'all are saving money. Simply this is a short-term illusion.

What Happens When Your Agreement Ends

Recollect: If you hang on to your phone after the two years it takes to pay it off under an EIP or an old-fashioned subsidy, the device is paid off. Y'all own the phone completely, and you're essentially using a free device with no monthly hardware payment. You'll still need to pay for your monthly data plan, plus whatever access fees that a carrier charges per line.

When you decide you want a new phone, y'all can sell your old one through outfits such equally Gazelle, NextWorth or uSell to assistance finance the new ane. With a lease, though, you just continue to pay month after month, yr after year.

What's more, comparison one leasing deal to another is not equally clear-cut every bit you might think, since leasing periods run for odd lengths. Apple's iPhone Upgrade Plan has a charter period of 24 months (you can get a new phone after 12 payments), while Sprint's iPhone Forever agreement runs 18 months (you can upgrade later on 12 payments) and leasing an Android device from Sprint requires a 24-month agreement. T-Mobile's Jump On Demand (which lets you upgrade your phone three times a yr) runs for 18 months, while ZTE's SmartPay lease program has half-dozen-, 9-, 18- and 24-calendar month iterations.

MORE: A Guide to No Contract and Prepaid Phone Plans

Comparing pricing among rival lease programs also proves challenging. T-Mobile offers the everyman monthly leasing fee, simply that requires a trade-in of an eligible device. Apple's iPhone Upgrade Program is the most expensive, with a 16GB iPhone 6s leasing for $32.41 a month, but Apple includes two years of AppleCare+ protection for your device.

One time your charter expires, you face a few choices. With Sprint, yous can upgrade to a new device, buy your existing phone at the price listed on your charter agreement or keep with a month-to-month lease. With T-Mobile, you can pay off the residual buy amount to go on your phone, or merchandise in your telephone for a newly leased model.

In other words, leasing isn't as like shooting fish in a barrel or simple as it sounds once y'all drill down. We asked both Dart and T-Mobile for copies of their lease agreements to check for any other caveats, but neither carrier provided one.

Bottom Line

Leasing'south lower monthly payments may await attractive. And for people who really want a new phone equally often as possible, the power to upgrade outweighs having to tie yourself to a carrier. But if you lot program on hanging on to your phone for two years, or longer, buying that phone through an EIP is the wiser financial telephone call.