You might think leasing and EIPs look similar, as both are built around monthly payments for a fixed term. There's one major difference, though: With an EIP, at the end of two years, you own your phone. Once the device is paid off, you can continue to use it with no additional monthly hardware costs, or you can sell your phone to finance a new model. With a lease, the monthly hardware costs are continual.
Those monthly payments tend to be lower for a lease agreement than with an EIP, just as they are usually lower over the short term when you rent instead of buy. In the case of phones, with an EIP, you pay a little more each month, because you're paying off the phone. For example, 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. Trading in your current phone for a leased device can mean even lower monthly payments at some carriers, and the newer the phone, the lower the monthly payment.
And that's the primary appeal to leasing: Just pay a regular monthly fee in perpetuity, and you always get to show off the most current superphone. Most leasing deals let you update before the two-year lease is up. T-Mobile lets you update up to three times a year, for instance. Early update opportunities and costs vary wildly with EIPs, but most require you to wait at least six months or to pay off at least half the cost of your old phone before you can get a new one.
That warning is sound advice. Despite the seeming simplicity and the outward appearance of a lower cost, most leasing plans involve a dizzying number of conditions and options, including the requirement to trade an "eligible" device to get the best deal.
More importantly, you should understand the commitment leasing entails. If you want to preserve that ability to regularly upgrade to new phones, you've got to stick with your current carrier. As a result, you could actually end up spending more money over time by leasing than by buying through an EIP.
That's one of the reasons carriers have embraced leasing: Consumers seem to be buying 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 once every 27 months.
If you're in a lease, phone sellers figure you'll buy a phone more often and will be less likely to switch carriers or brands. "Carriers are in a never-ending quest to (a) keep their subscribers and (b) steal subscribers from everyone else," IDC's Llamas said. "Leasing plans like these are a way to do just that."
That's good 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 appear you are saving money. But this is a short-term illusion.
Remember: 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. You 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 any access fees that a carrier charges per line.
When you decide you want a new phone, you can sell your old one through outfits such as Gazelle, NextWorth or uSell to help finance the new one. With a lease, though, you just continue to pay month after month, year after year.
What's more, comparing one leasing deal to another is not as clear-cut as you might think, since leasing periods run for odd lengths. Apple's iPhone Upgrade Program has a lease 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 after 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 year) runs for 18 months, while ZTE's SmartPay lease program has 6-, 9-, 18- and 24-month iterations.
Comparing pricing among rival lease programs also proves challenging. T-Mobile offers the lowest monthly leasing fee, but 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.
Once your lease expires, you face a few choices. With Sprint, you can upgrade to a new device, buy your existing phone at the price listed on your lease agreement or continue with a month-to-month lease. With T-Mobile, you can pay off the residual purchase amount to keep your phone, or trade in your phone for a newly leased model.
In other words, leasing isn't as easy or simple as it sounds once you drill down. We asked both Sprint and T-Mobile for copies of their lease agreements to check for any other caveats, but neither carrier provided one.
Leasing's lower monthly payments may look attractive. And for people who really want a new phone as frequently as possible, the ability to upgrade outweighs having to tie yourself to a carrier. But if you plan on hanging on to your phone for two years, or longer, buying that phone through an EIP is the wiser financial call.
Often times people see a cash purchase as the best financial solution for them, and sometimes that may be the case; however, technology equipment depreciates over time, and becomes outdated rapidly. The following text establishes some of the pros and cons to a cash purchase of buying your tech equipment.
However, some carriers that provide for phone leasing allow you to pay an extra fee at the end of the lease if you want to own the phone, which is usually based on the market value of the phone at that point.
If you want the newest device simply for bragging rights, you may want to reconsider whether you really, truly need this. After all, while showing off your flashy new phone may be fun for a while, it could easily cost you $1,000 more than simply buying the phone yourself.
That said, if you do choose to lease a phone, make sure you read the fine print as well as doing the math on how much the contract will really cost, including if you change your mind or if something happens to your device.
However, when we think about the consumers who just want to use a gadget that might have long years of usage and replacement, then buying is a great option. But, if there are consumer segments who intend to live a technologically up-to-date lifestyle, then they might wish to upgrade their existing asset to the latest ones in the market, and investing a huge amount of money in a smaller gap of time would be a costly decision.
When you buy a gadget, you become the sole owner of the same until you sell it to someone else or have disposed of it due to any reason whatsoever. However, when it comes to leasing, you can pay a predetermined sum of money upfront (as per the agreement) and convert the remaining amount into EMI to get the device to the life of the lease period.
Most of the consumers perceive an assumption that leasing is a long-term commitment for a single gadget and the investment can ladder more than what is estimated if brought upfront in Buying. The fear of an additional rate of interest and cumulative hidden additional tricks drain the minds of stress and the consumers end up investing a huge pile of money for acquisition by buying the devices.
It is to be understood that leasing does have an additional payment scheme over and above the buying price, but these are due to several factors that result in bringing you flexibility. With options like tech up-gradation, services, and maintenance or offers to buy the device after the lease period or end the lease at your convenience can significantly occur to you as a great deal more than investing your money at once to acquire the same asset in terms of ownership and usage.
This is where the flexibility of leasing comes. When you enter into a lease agreement, you acquire an asset, but you also get an option to upgrade your possession to the latest version as per your agreement. Not only this, with the latest asset refreshment and up-gradation at a reasonable investment, you can stay aligned with the technology conquering the market as well as not worry about the previous device as you hand it back to the lessor in return.
Also, during the instance when the technology you require no longer supports your device with the indicator signal to upgrade, be it ethical or legal disposal after the purpose of buying the product and the usage is fulfilled, Buying might re-question your decision again.
Instead of going for entire ownership, you can yet become a flexible owner of the devices till the period of a lease agreement if you turn to options other than buying. You will be the user as well as the owner of the equipment till the lease period and later return it or upgrade it with the latest device as per the flexibility of agreement with your lessor.
If you are worried about financing options specializing in the equipment of leasing, you can rely on NuovoPay. Any OEMs or telecom manufacturer or technological device reseller can streamline the intricate process of phone leasing and requisition. With NuovoPay, simplified leasing procedures and onboarding with straightforward payments can be a forthright appreciation for partners.
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