Major cell phone carriers in the United States offer a leasing or equipment installment plan (EIP) that may be appealing for consumers. A substantial portion of the industry for wholesale cell phones has been driven by the adoption of these plans.
It is important to understand how mobile handset leasing plans work, given their profound impact on our industry. Now, let’s answer some of the biggest questions surrounding mobile handset leasing.
What Is Mobile Handset Leasing?
Mobile handset leasing involves financing the cost of a cell phone. It typically requires a consumer to make monthly payments for one year or longer. However, at the completion of a mobile device leasing agreement, the consumer does not own their phone. At this point, the consumer can pay a buyout price for their device. Or, the consumer can begin a new lease and upgrade their phone. The consumer also has the option to buy or lease a different phone.
What Are the Benefits of Leasing a Phone?
Mobile device leasing can be a viable option for consumers looking to get an affordable cell phone without a long-term commitment. For instance, a consumer can take advantage of smartphone leasing to pay a monthly fee for the latest iPhone. In this scenario, the consumer won’t have to worry about paying the up-front cost to get a state-of-the-art smartphone. Instead, the consumer can sign up for a handset leasing agreement that generally lasts anywhere from one to three years. After the mobile leasing agreement is complete, the consumer can purchase their phone outright for a predetermined amount. Or, if the consumer wants to upgrade to the new version of the iPhone, he or she can start a new mobile handset leasing agreement.
Is Mobile Device Leasing Readily Available?
Mobile handset leasing is a popular option for consumers across the United States. Research indicates that roughly half of all smartphones purchased in the U.S. were linked to installment plans in the three months ending Aug. 31, 2020.
Meanwhile, most smartphone carriers provide built-in options for buying or swapping phones once lease periods are up. Not all carriers offer genuine “lease” options as well.
Which Cell Phone Carriers Offer Mobile Leasing Programs?
Here’s a look at which cell phone carriers provide EIPs and mobile handset leasing programs, along with how their respective offerings work.
Verizon (EIP)
In Verizon’s EIP, the payment period for nearly all devices is 24 months. Customers who enter into device installment plans with Verizon can choose to pay their device’s total price at any time. There is also the option to upgrade the device if it is paid down by at least 50%.
A down payment may be required as part of Verizon’s program. The first bill for the program may be higher than subsequent ones, which is outlined in the program’s terms and conditions. For consumers who cancel their Verizon service before their smartphone is paid off, they are responsible for paying off the full cost of their device. As one of the U.S. wireless market leaders, it is surprising that Verizon has yet to offer flexible leasing options. Ultimately, Verizon’s monthly payment program for devices delivers fewer bells and whistles than its peers. Waived interest and finance charges still make Verizon’s program an attractive option.
AT&T (EIP)
AT&T offers Next Up installment plans with $0 down and no interest. The plans are designed to help consumers make low monthly payments to cover the full cost of their smartphone over the course of 30 months.
With Next Up, customers are eligible to upgrade to a new smartphone once they pay off 50% of the price of their current device. In addition, they can add Next Up to their existing cell phone plan for $5 per month.
Sprint (Lease)
Sprint offers phone leases through a program called Flex Lease. Customers get a low cost of entry with the option to purchase, upgrade, continue, or return a device at the end of 18 months. Sprint retains ownership of a leased device unless the customer decides to pay off the remaining balance. In this case, Sprint allows for a one-time payment or nine monthly installment payments.
Sprint does not provide flexible payment or length options with Flex Lease. But, customers can choose to pay off a lease early or purchase their device at any time during the lifespan of a lease.
Another thing to keep in mind with Flex Lease: A customer may be required to pay a monthly “rent charge” as part of their agreement. Consumers may be subject to this charge if they have a poor credit rating. Along with phone leases, Sprint offers options for paying for phones and equipment in monthly installments. The costs associated with these options vary based on the phone or equipment, duration of the agreement, and other factors.
T-Mobile (Lease)
Those who are weighing the pros and cons of T-Mobile lease vs. buy options should check out the company’s JUMP! On Demand Program.
JUMP! On Demand may be an ideal option for those who want to upgrade their smartphone as frequently as possible. A standard JUMP! On Demand lease covers 18 months; however, JUMP! On Demand allows customers to “jump” leased devices as frequently as every 30 days.
Customers interested in JUMP! On Demand are asked to bring in their most recent phone for inspection when they sign up for the program. A T-Mobile Mobile Expert will ensure that everything is in working order before swapping the phone for a new device.
T-Mobile’s lease plan drives traffic into the carrier’s brick-and-mortar stores, too. Phones that are eligible for JUMP! On Demand can only be purchased with the help of T-Mobile Mobile Experts at T-Mobile retail locations.
Consumers have three options at the end of a JUMP! On Demand lease period: return their phone, purchase it outright, or pay off the device over a nine-month period. T-Mobile also offers a separate EIP that allows customers to pay for their devices over a set time frame.
Now that T-Mobile and Sprint have joined forces, leasing could take over as the industry’s preferred model. T-Mobile and Sprint both offered flexible leasing terms that have stirred up significant interest from consumers thus far. Together, they look poised to drive interest for smartphone leasing in the years to come, which could push other industry leaders to choose leasing over EIPs.
Is a Consumer Required to Purchase Their Phone at the Conclusion of a Handset Leasing Agreement?
Leasing a smartphone works similarly to leasing a vehicle. While some consumers lease with the intent to purchase their phone, they are not required to do so.
Should a Consumer Lease a Cell Phone or Buy One?
Mobile handset leasing may be a great option for consumers who lack the up-front funds to cover the cost of a smartphone or want to regularly upgrade their device. It lets a consumer pay monthly charges in lieu of an up-front charge. At the end of a lease agreement, the consumer has the flexibility to once again decide if leasing or buying a cell phone is the best option based on their current circumstances.
Leasing, however, may be more expensive in the long run than purchasing a smartphone outright. To determine the exact cost of leasing a phone, it helps to calculate the total cost of a lease agreement before signing on the dotted line. This ensures a consumer can assess the lease agreement cost and determine whether purchasing a phone outright is the better option based on their finances.
Don’t forget to consider how often a smartphone can be upgraded as part of a lease agreement, either. For example, a consumer may purchase a smartphone outright but find that the device does not match their expectations. In this instance, the consumer may sell their phone but struggle to get an offer at or near the device’s original price. Conversely, if this consumer leased their phone, he or she would be eligible to get a new device at the end of their agreement. The consumer may also be able to upgrade their device after he or she pays off a certain portion of it during their agreement.
A careful evaluation of leasing and purchasing cell phones can help a consumer make an informed decision about which option is best. Of course, consumers may want to look at used smartphones as well.
Used phone resellers and wholesalers can supply consumers with a wide range of iPhone and Android devices. They can keep their smartphone inventories up to date and offer accurately graded models. With this approach, used phone resellers and wholesalers can provide consumers with a terrific alternative to leasing or purchasing new devices.
What Does Mobile Handset Leasing Mean for Used Cell Phone Resellers and Wholesalers?
From a supply perspective, mobile handset leasing is unequivocally positive for the industry. Leasing plans encourage early upgrade and trade-in of devices. Given that the United States is still the primary source of used handsets globally, and 50% of retail sales in the U.S. are linked to leasing plans, such plans are a major driver of global used phone supply.
From a demand perspective, mobile handset leasing may appear to be a problem for used phone resellers and wholesalers. But, it is important to note that leasing is generally offered on new cell phones. For consumers who want affordable alternatives to new phones, they may still consider used options.
Also, not all consumers are eligible for mobile handset leasing plans. These consumers may look to used phone resellers and wholesalers that can provide quality devices at budget-friendly prices.
And, consider what could happen if a consumer breaks their device in the middle of a handset leasing plan. If the consumer is ineligible for an upgrade, he or she may be out of luck. At this point, the consumer may choose a used phone wholesaler or retailer that can supply an economical alternative to a new device.
Finally, mobile handset leasing is not available everywhere. For used phone resellers and wholesalers that want to extend their global reach, they may be able to sell devices overseas, without having to worry about competition from carriers that offer leasing options.
Can Used Phone Resellers and Wholesalers Offer Flexible Payment Options?
Used phone resellers and wholesalers can offer installment plans to customers. Doing so can give you additional opportunities to compete with leasing plans provided by cell phone carriers.
There are many flexible options you can provide to customers interested in used cell phones. For example, Best Buy and other retailers offer credit cards with interest-free promotional periods of around two years to pay off the cost of a new cell phone. Others use third-party services like Affirm to offer personal loans that can be used to finance a phone, albeit with interest.
Resellers and wholesalers may want to pursue SmartPay for letting customers lease used phones, too. SmartPay involves requiring a customer to make an initial payment for their used phone at checkout. Then, the customer is responsible for payments every 30 days. The payments are automatically withdrawn from an account that the customer designates for their used phone charges.
What Does the Future Hold for Equipment Installment Plans and Leases?
The popularity of leasing and EIP programs will continue to grow. To date, many carriers have profited from these plans. At the same time, consumers like the low costs and flexibility associated with them.
In the long run, used phone resellers and wholesalers can benefit from EIPs and leases, too. The trade-in volume that’s created by flexible leasing options may lead to more used iPhone and Android devices hitting the secondhand market. The result: Used phone resellers and wholesalers can stock first-rate products that align with consumers’ expectations.
Explore the Used Cell Phone Options Available from WeSellCellular
WeSellCellular empowers used phone resellers and wholesalers to stock quality phones at budget-friendly prices. Set up an account to stay in the loop when we add to our used iPhone, Android, and Samsung inventories. Then, you can browse our large collection of used phones and buy devices any time you choose.
Sources referenced:
https://www.sprint.com/en/support/sprint-flex-lease/more-topics/agreement-information.html#10
https://www.sprint.com/en/support/solutions/services/faqs-about-monthly-installments.html
https://www.att.com/support/article/wireless/KM1106686/
https://www.verizon.com/support/device-payment-faqs/#:~:text=The%20device%20payment%20program%3A,*
