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Smartphones are designed to make our lives easier. 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. The average cost of a smartphone in the consumer market in 2023 was about $823—and that average is expected to rise over the years. 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. You sign a lease with a smartphone leasing company, which gives you the right to use the smartphone for a set period. In return, you make lease payments.
Leasing isn’t the same as buying a phone on an installment plan, which many cellphone networks also offer to make 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. For instance, T-Mobile offers 18-month smartphone leasing. At the end, 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 phone accessories, such as Bluetooth earpieces or car chargers. Anything you pay toward the lease covers only the physical use of the phone, which means you need to pay for cellphone service separately.
Smartphone leasing may or may not require a credit check, depending on the lessor. This could make it a good option for people who don’t have sufficient credit to purchase a regular contract phone.
Pros and Cons of Smartphone Leasing Explained
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.
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Regular upgrades are available.
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It may be less expensive than buying.
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Credit may not be an obstacle.
Pros of Smartphone Leasing
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.
Less Expensive than Buying
A typical premium smartphone can run in the range of $1,000 or more. But, leasing one may require you to make a small initial payment of $50 to $100, followed by low monthly payments. For instance, T-Mobile offers the following lease deals:
- Pay $18.75 per month for a Samsung Galaxy A12 for 18 months, with $0 down for a total of $148.50.
- Pay $26.84 per month on an 18-month lease for the Apple iPhone 12 64 GB, plus $75 down. This comes to a total of $558.12.
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 is less than the 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.
Cons of Smartphone Leasing
Leasing Company Owns the Phone
When you lease a smartphone, you don’t own it. Rather, the cellphone company or lease provider does. On the other hand, when you purchase a smartphone, it’s yours. This 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 when you lease a smartphone—unless you decide to buy the phone at a later date.
Buyout Fees May Apply
If you have the option to purchase a smartphone that you’ve been leasing at the end of the lease term, 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 upfront.
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 may occur 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.
Is Leasing a Smartphone a Good Idea?
This depends entirely on your situation. Leasing may be a good option if you want to test certain models rather than commit to one. It’s also the most inexpensive option compared to buying a phone. Keep in mind there may be additional fees and deposits that may add to your monthly lease payment. Buying a phone, on the other hand, lets you keep the phone after it’s paid for, letting you do whatever you choose. This means you can sell it, give it to someone else, or trade it in for a brand new phone.
Can You Get a Smartphone with Bad Credit and no Deposit?
Yes, you may be able to get a smartphone with bad credit and no deposit. But this depends on the mobile carrier because it is a form of financing. Consider getting a cosigner if you want to improve your chances. You may even be able to purchase a phone directly from the manufacturer, such as Apple or Samsung, or a retail store like Best Buy if you want to buy the phone outright.
Do Mobile Phone Companies Do a Credit Check?
That depends. Some companies run credit checks to determine whether you qualify for financing to purchase your phone while others may not. That’s why it’s important to check with the company to verify whether your credit score is required before you can get a phone or mobile service. If you want to bring your own phone or buy the phone outright, consider a prepaid plan. These plans allow you to pay for the month ahead and typically don’t require a credit inquiry.
The Bottom Line
Smartphones are increasingly ubiquitous and changing the world in which we live. You may consider leasing a smartphone if you don’t want to commit to a single phone model for a long time. It also could be a good fit if you calculate the cost differences between buying a phone outright and leasing, and determine 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.