Is it better to buy or lease a new cell phone? The answer can depend on your situation and a few different factors like the three we'll look at in this video. https://moneyat30.com/should-you-buy-lease-or-finance-your-next-smartphone/
Should You Buy, Lease, or Finance Your Next Smartphone? https://moneyat30.com/should-you-buy-lease-or-finance-your-next-smartphone/
One big difference between financing your phone and buying it outright is that, unless you pay in full upfront, your phone will be locked. This just means that the device can only be used on a certain network, thus preventing you from taking a phone you still owe money on and taking it to another carrier. However, once your device is fully paid for, you can request to have it unlocked.
For most people, having an unlocked phone isn’t exactly a necessity. On the other hand, if you don’t want to be tied to a certain carrier, you might consider paying in full. Another important note is that, as I’ve mentioned in some of my travel posts, you can sometimes save some money on cell phone service by buying international SIM cards. Unfortunately, this plan will only work if your phone is unlocked.
Financing vs. Leasing
To be sure, there is a difference between simply financing a new phone and leasing one. In a financing agreement, you’ll likely be making monthly payment that will eventually add up to the phone’s total cost, at which point you’ll own it free and clear. On the other hand, like with leased vehicles, your device will need to be returned once the contract terms end.
Adding to the confusion, some of the programs that various carriers offer are blurring the lines between these two concepts. For example, AT&T Next allows customers to purchase phones, make monthly payments based on the option they choose, and trade it in for an upgrade after a certain length of time. Alternatively, you could forgo your “early upgrade,” continue making your regular payments (or pay it off early), and keep the device.
What is the Best Way to Purchase a New Smartphone?
The Argument for Financing
Smartphone financing is popular for a number of reasons. Chief among them is the fact, in many cases, this financing comes with 0% interest, meaning that you’re spending the same amount whether you pay upfront or have monthly installments. Because of this arrangement, many (but not all) would argue there’s no reason not to finance your phone under these terms if you wanted to buy instead of lease.
The Argument for Paying in Full
What’s ironic is that many cell phone shoppers used to balk at the idea of signing a two-year contract to get a new phone, yet so many are still locked into telecom agreements because they’re financing or leasing their device. If you truly want to be untethered from a network and don’t want to have to worry making monthly payments, it may make sense to just pay in cash (not literal cash as you’ll want those credit card rewards) upfront.
The Argument for Leasing
On the surface, it may seem that the reason people would prefer to lease their phones instead of buying them is simply because they always want to have the shiniest new toys. That may be a main factor, but it’s also about how you use your phone and will continue to use your phone in the coming years. To some, there’s just little or no value to a phone after a few years, so trading it in actually makes more financial sense.
There’s also something to be said for having the latest model cell phone beyond the bragging rights and tech envy. As smartphones become the primary device for many of us, hackers are consistently discovering new ways to break into them. Thankfully, companies like Google and Apple are pretty quick to patch these problems with software updates but, if your phone is too old, you may no longer to receive such updates, potentially leaving you vulnerable. That may be a stretch to some, but is a considerable concern for others.
Which Argument is Right?
Well — it depends. For those who need a new phone and may not have the $700+ dollars on hand to buy one, monthly payments may make sense. Meanwhile, international travelers or those who don’t want to be tied to any network may opt to pay in full. Finally, if you don’t plan on using your phone for long and want to ability to upgrade to that latest model as soon as it hits the market, leasing might be worth the price.
Over the past few years, the way many Americans pay for their cell phones has changed drastically. While a $200 smartphone with a two-year contract may no longer be an option, you now have the choice to finance your phone, lease one, or simply pay for it in full. No matter what you choose, just be sure that your plan is one that you can honestly afford and that makes financial sense for your situation.