Pros and Cons of Smartphone Leasing

High prices make buying hard for some

Smartphones make everyday life easier on many levels. Whether you want to log in to online banking, get directions when taking a road trip, or check the weather, you can do it all with a smartphone. That convenience can come at a price, however. Some premium smartphone models cost more than $1,000 on average, as of 2020.

Leasing a smartphone may seem like a more attractive option than buying one, if you would like to have the latest model without the high price tag.

Key Takeaways

  • Premium smartphone models can easily sell for $1,000 or more on average.
  • Leasing a smartphone offers the benefit of being able to upgrade to the latest models regularly without incurring contract fees.
  • Keeping a smartphone at the end of a lease term may require paying a buyout fee to purchase it.
  • Leasing could save money over buying new phones, but it doesn’t convey ownership, similar to leasing a car or an apartment.

What Is Smartphone Leasing?

Leasing a smartphone is similar to leasing a car or an apartment. You sign a lease with a smartphone-leasing company, which gives you the right to use the smartphone for a set period of time. In return, you make lease payments.

It’s important to note that leasing is not the same as buying a phone on an installment plan, which many cellphone networks also offer as an option for making smartphones more affordable. Spectrum, for example, allows you to pay in 24 monthly installments, after which you own the phone outright.

When you lease, you generally need to make one initial payment up front, followed by weekly, biweekly, or monthly payments. The length of the lease term can vary from one provider to the next. T-Mobile, for example, offers 18-month smartphone leasing.

At the end of the lease term, you have the option to:

  • Return the phone and lease a different one.
  • Sign a new lease for the same smartphone.
  • Purchase the smartphone that you’ve been leasing.

You also may be able to lease accessories for the phone, such as Bluetooth earpieces or car chargers. Anything you pay toward the lease covers only the physical use of the phone; you need to pay for cellphone service separately.

Smartphone leasing may or may not require a credit check, depending on the company from which you’re getting the phone. This could make it a good option for people who don’t have sufficient credit to purchase a regular contract phone.

Unless you purchase equipment protection insurance, you may be responsible for covering any damages to a leased smartphone out of pocket.

Pros and Cons of Smartphone Leasing

Leasing a smartphone could make more sense than buying one in some cases. Whether it’s right for you can depend on your credit, budget, and needs. Here’s a quick look at how the pros and cons of smartphone leasing compare.

  • Regular upgrades are available.

  • It may be less expensive than buying.

  • Credit may not be an obstacle.

  • The leasing company owns the phone.

  • Buyout fees may apply.

  • Leasing can involve additional fees.

Regular upgrades are available

Smartphone technology is constantly evolving and adapting, with new models being released all the time. If you’re a tech aficionado, then leasing a smartphone makes it easier to upgrade when a new model comes along. Depending on the length of the lease term, it’s possible to get a new phone every year, allowing you to keep up with the latest technological advancements.

It may be less expensive than buying

Though a typical premium smartphone model can run in the range of $1,000 or more, the global average smartphone selling price in 2021 is only $363. Leasing one may require you to make a small initial payment of $50 to $100, followed by low monthly payments. At T-Mobile, for example, it’s possible to pay as little as $8.25 per month to lease a Samsung Galaxy A11 for 18 months, with $0 down. That’s $148.50, which is $32.50 less than the phone’s standard list price of $180.

The most expensive phone that T-Mobile leases is the Apple iPhone 12 64GB, with a list price of $699. You pay $26.12 per month on an 18-month lease, plus $150 down. This comes to a total of $620.16, which gives you a savings of $78.84.

If you turn in your phone after 18 months for a new phone, and if you make sure that the total lease cost on your new phone will be less than its list price, then you will continue to come out ahead of the game. Still, you’ll likely be paying nearly what the phone costs without ever owning it.

Credit may not be an obstacle

A credit check is standard for many cellular service providers when applying for a contract phone. Poor credit may not result in a denial of service, but you may have to offer a larger deposit to get a phone. With smartphone leasing, poor credit or no credit history at all may not be a roadblock to getting service.

Smartphone leasing may require a hard or soft credit check, so you should ask about this before applying for a lease.

Leasing company owns the phone

When you lease a smartphone, you don’t own it; the cellphone company or lease provider does. Again, that’s similar to leasing an apartment or a vehicle. On the other hand, when you purchase a smartphone, it’s yours. That means that you can decide what to do with it, including whether to keep it or sell it to someone else. You don’t have that option with leasing, unless you decide to buy the phone later.

Buyout fees may apply

If you have the option at the end of the lease term to purchase a smartphone that you’ve been leasing, it’s important to consider the buyout fee. This is a fee that you pay to own the phone going forward. The amount that you’ll pay to buy a leased phone can vary from company to company, so it’s important to read the fine print beforehand. That way, you can run the numbers to understand whether it’s cheaper to lease and then buy, as opposed to skipping leasing and just buying the phone up front.

Leasing can involve additional fees

When you lease a car, the dealership can charge additional fees for wear and tear or high mileage when you turn it in at the end of the lease term. The same thing can happen with leasing a smartphone. If you turn in a device that’s damaged beyond what’s expected for normal use, you could be charged extra fees.

When choosing a smartphone lease, also calculate the cost of any minimum service plans that you’re required to have for the device to work properly.

The Bottom Line

Smartphones today are increasingly ubiquitous and changing the world in which we live. Leasing a smartphone is something you may consider if you would rather not be committed to a single phone model for the long term. It also could be a good fit if you have calculated the cost differences between buying a phone outright and leasing and have determined that the latter is less expensive. Before signing a smartphone lease, be sure to read through the details carefully to understand what you’ll pay and what your options are once the lease term expires.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
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  2. SmartPay. "Don't Settle—Get the Samsung Galaxy Smartphone That You Want."

  3. Spectrum. "Device Payment Plan Information."

  4. T-Mobile. “Get a Great Smartphone for Less Money Down.”

  5. Cricket Wireless. “How Phone and Accessory Leasing Works.”

  6. T-Mobile. "Protection 360."

  7. International Data Corporation. “Smartphone Shipments to Grow 5.5% in 2021 Driven by Strong 5G Push and Pent-Up Demand, According to IDC.”

  8. T-Mobile. "Samsung Galaxy A11."

  9. Apple. “Buy iPhone 12.”

  10. Verizon. “Credit Check.”

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The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.