Saving Money on Mobile Devices: The Pros and Cons of Leasing vs. Buying

Last Updated: July 27, 2024By Staff Reporter

One of the biggest decisions when it comes to saving money on mobile devices is whether to lease or buy. Leasing a device means making monthly payments to effectively rent it from your carrier, with the option to upgrade or buy it out at the end of the term. Buying a phone, either outright or through an installment plan, means you’ll own it after making all the payments. Each approach has its pros and cons in terms of upfront costs, long-term expenses, upgrade frequency, and flexibility. In this article, we’ll take a deep dive into the details of leasing vs. buying to help you make an informed decision and keep more money in your pocket.

The introduction sets up the central question of the article and provides an overview of the key factors readers should consider. It emphasizes the importance of mobile devices in daily life and the financial challenges of upgrading. The second paragraph previews the lease vs. buy comparison and the pros and cons the article will cover in depth. This intro should engage readers and provide a clear roadmap for the content to follow.

Key Takeaways

Leasing a mobile device can lower your monthly payments compared to buying
When you lease, you can upgrade to a new phone more frequently, usually every 1-2 years
Buying a phone outright is more expensive upfront but can save you money in the long run
When you own your device, you have more flexibility to sell, trade-in, or keep using an older phone
Carefully compare the total costs of leasing vs. buying based on your usage and upgrade preferences

What Does it Mean to Lease a Mobile Device?

Leasing a mobile device means you make monthly payments to essentially rent the phone or tablet from your carrier. Lease terms are usually 18-24 months. At the end of the lease, you have the option to upgrade to a new device or buy out the remaining value of your current one.

The main appeal of leasing is getting access to the latest phones for a lower monthly payment compared to buying outright or paying off an installment plan. Carriers can offer lower lease payments because they still own the device and get it back to refurbish and resell at the end of the term.

However, leasing has some potential downsides to consider as well if saving money on mobile devices is your goal. Let’s take a closer look at the pros and cons.

Pros of Leasing a Mobile Device and Saving Money on Mobile Devices

1. Lower Monthly Payments

The biggest advantage of leasing a phone is that you’ll usually have a lower monthly payment compared to buying and this is one factor of saving money on mobile devices. Exact prices vary based on the phone model, carrier, and any promotions. But in general, leasing saves about $10-20 per month compared to a typical installment plan.

For example, let’s say a new phone costs $1000 retail price. Buying it on an installment plan with $0 down and 0% APR would cost about $42 per month for 24 months ($1000 / 24 = $41.67). Leasing the same phone might cost around $30 per month – a savings of $12 monthly or $288 over a 24-month term.

2. Ability to Upgrade Frequently

Another big draw of leasing is the ability to upgrade to the latest phone more frequently. Most leases let you get a new device every 12-18 months at no extra cost (besides potential upgrade fees).

In contrast, when you buy a phone outright or on an installment plan, you own it after making all the payments. At that point, you can keep using it as long as you want. But if you like having the newest phone, you’ll have to sell or trade-in your current one and pay the remaining balance before upgrading.

So if getting a cutting-edge device regularly is a priority for you, leasing can make upgrades more accessible. Just keep in mind that upgrading every year or two still adds up in monthly payments over time.

3. Less Upfront Expense

Leasing can also reduce your upfront costs to get a new phone compared to buying it outright. Most leases have $0 down payment options available, although you may need to pay an upgrade or activation fee.

With installment plans, carriers sometimes require a down payment on more expensive models – typically around $100-200. And if you buy a phone at full retail price, you’ll owe the entire cost (usually $500-1000+) all at once.

So if you want to spread out the cost of a pricey new phone over time, leasing provides that option with minimal money due on day one. The tradeoff is you’ll keep making monthly payments as long as you continue leasing.

Cons of Leasing a Mobile Device and Saving Money on Mobile Devices

1. Higher Total Cost

Although leasing can save you money month-to-month, it often costs more in the long run compared to buying a phone outright. Remember, when you reach the end of a lease, you have to either upgrade to a new device (starting the monthly payments over again) or pay a lump sum to own your current phone.

Here’s an example of how the math works out:

Lease a $1000 phone for $30/month for 24 months. At the end of the term, you’ve paid $720.
To own the phone, you then have to pay a buyout price – typically a few hundred dollars based on the device’s residual value. Let’s say it’s $350.

So in total, leasing the phone and then buying it cost $1070 ($720 in lease payments + $350 buyout price). Purchasing the same phone outright or on a 24-month installment plan would have cost $1000.

The difference gets larger if you keep leasing and upgrading in perpetuity. Say you get a new $1000 leased phone every 2 years. Over 6 years, you’d pay $2160 in lease payments ($30/month * 72 months). Buying a $1000 phone every 2 years would cost $3000 total.

Of course, these examples don’t account for the resale or trade-in value of phones you own. But in general, buying will cost less than continuously leasing if you’re able to use a device for more than 2-3 years.

2. Lack of Ownership

Another drawback of leasing is that you don’t own your device until you’ve made all the payments and a final buyout. That means you can’t sell or trade in a leased phone to help offset the cost of an upgrade.

With a purchased phone, you’re free to resell it for cash or trade it in for credit toward a new device whenever you want. Even carrier-locked phones can be sold as long as the buyer plans to use them on the same network.

The lack of ownership with leasing also means you’re on the hook for any excess wear and tear. Most carriers charge fees for broken screens, liquid damage, etc. on leased devices. But when you own your phone outright, you can choose whether the damage is worth repairing.

3. Harder to Switch Carriers

Finally, leasing a phone makes it harder to switch wireless carriers compared to owning your device outright. Since your carrier owns the phone, you can’t take it to another provider unless you pay off the remaining balance first.

With an unlocked phone that you own, you’re free to change carriers whenever you find a better deal. You can even sell your current phone and use the proceeds to help pay off any early termination fees.

So if you think you might want to chase promotions and switch providers down the line, buying may offer more flexibility than leasing. Just be aware that carrier installment plans often come with limitations and fees for early payoff too.

Pros and Cons of Buying a Mobile Device

In the debate of leasing vs. buying a mobile device, there are also several pros and cons to consider on the purchasing side. Here’s a quick overview:

Pros of Buying

You own the device outright and can resell, trade-in, or give it away at any time
Cheaper than leasing in the long run if you use a phone for more than 2-3 years
No monthly payments after paying off the device (unless you have to finance it)
More flexibility to switch carriers or sell/trade in your phone to offset upgrade costs
Don’t have to worry about lease-end buyout prices or early termination

Cons of Buying

Higher upfront costs, especially if you buy at full retail price
May need to make a down payment on an installment plan
Slower upgrade cycle since you need to sell or trade-in your current device first
Bigger financial hit if your phone gets lost, stolen, or damaged
Some installment plans charge an early payoff fee if you want to upgrade sooner

As you can see, buying has some definite advantages – especially in terms of long-term savings and ownership privileges. But it also requires more cash upfront and makes upgrading a slower process than with leasing.

Comparing Lease and Installment Plan Prices

Trying to estimate the long-term costs of leasing vs. buying a phone can get tricky. Let’s look at a couple more examples to see how the math plays out. We’ll compare a lease to a 0% APR installment plan since most carriers no longer subsidize phone prices with 2-year contracts.

Example 1: iPhone 12 ($830 retail)

24-month lease: $30/month = $720. At the end of the term, pay a $210 buyout price to own the phone. Total cost: $930
24-month installment plan: $34.59/month = $830. You own the device at the end of the term. Total cost: $830

Example 2: Samsung Galaxy S20 ($1000 retail)

18-month lease: $40/month = $720. At the end of the term, pay a $330 buyout price to own the phone. Total cost: $1050
24-month installment plan: $41.67/month = $1000. You own the device at the end of the term. Total cost: $1000

As these examples illustrate, installment plans usually come out cheaper overall compared to leasing and then buying the device. The gap is smaller on higher-end phones and when you compare a longer installment term to a shorter lease. But in general, buying will save you around $50-100 over 2 years.

Of course, these calculations change if you decide to upgrade at the end of your lease instead of buying the device. At that point, your monthly lease payments start over with a new device. Let’s add up those costs for a few upgrade cycles:

Lease a new $800 phone every 2 years for 6 years:

Years 1-2: $30/month * 24 months = $720
Years 3-4: $30/month * 24 months = $720
Years 5-6: $30/month * 24 months = $720
Total cost: $2160

Buy a new $800 phone every 2 years for 6 years:

Years 1-2: $800 one-time purchase
Years 3-4: $800 one-time purchase
Years 5-6: $800 one-time purchase
Total cost: $2400

In this scenario, leasing saves you money compared to buying a new phone outright every 2 years. But keep in mind that the buy scenario doesn’t account for any resale value or trade-in credit on your old devices. If you can sell each phone for around $200 after 2 years, that brings the effective cost of buying down to $1800.

Making the Decision

So when it comes down to it, should you lease or buy your next mobile device? Here are a few questions to ask yourself:

How often do I like to upgrade? If it’s every year or two, leasing might make more sense. If you’re happy to hold onto a phone for 3-4 years, buying will likely be cheaper.
Is it worth it to me to always have the latest phone? Leasing offers an easier and more affordable upgrade path, but it means continuous monthly payments. Buying requires you to either pay full price for each new device or wait until you’ve paid off an installment plan to upgrade.
Do I want the option to resell or trade in my device? When you own a phone, you can do what you want with it – including selling to help fund future upgrades. Leased phones have to be returned at the end of the term.
Am I prone to damaging or losing phones? If so, leasing could end up being pricey since you’re responsible for any excess wear or loss. Buying gives you more flexibility to deal with damaged devices.
How much can I afford to spend upfront and monthly? Leasing and installment plans both offer low-to-no down payments. But buying outright requires you to fork over a larger chunk of change on day one. On the flip side, leasing means a longer commitment to monthly payments.

Ultimately, the best way saving money on mobile devices comes down to your personal preferences and financial situation. Take the time to comparison shop, read the fine print on leases and installment plans, and crunch the numbers for your specific upgrade habits. By doing your homework, you can find the right approach to keep more of your hard-earned cash in your pocket.

Conclusion

In the end, there’s no universally right answer to the question of whether leasing or buying a phone is better. It depends on how often you upgrade, how much you can afford to spend upfront and monthly, and your preferences around device ownership.

Leasing can be a good fit if you always want the latest phone and are willing to keep making monthly payments. Buying outright or on an installment plan will usually save you money in the long run, especially if you hold onto your device for a few years. It also offers more flexibility to sell, trade-in, or keep using an older phone.

The key is to carefully compare your options and do the math based on your situation. Consider all the costs involved – including down payments, monthly charges, buyout prices, insurance premiums, and potential upgrade or early termination fees. And don’t forget to factor in the resale or trade-in value of phones you own.

By taking the time to weigh the pros and cons of leasing vs. buying, you can make an informed decision that helps you save money on mobile devices while still enjoying the features and upgrades that matter most to you and saving money on mobile devices.

FAQs

How long are most phone leases?

The majority of phone leases last 18-24 months. A few carriers offer 12-month leases, but they usually come with higher monthly payments.

Can I buy out my lease early?

Policies vary, but most carriers allow you to buy out a leased device early. You’ll just need to pay the remaining lease balance plus a purchase option price. Contact your carrier for specifics.

What happens if I damage a leased phone?

It depends on the extent of the damage. Minor scrapes and dings are usually okay. But carriers will charge fees for broken screens, water damage, etc. Many also require you to have device protection insurance, which has a deductible.

Do I have to give my old phone back when I upgrade on a lease?

Yes, carriers require you to trade in your previous leased device when upgrading to a new one. The old phone needs to be in good condition with no major damage to avoid extra fees.

Is it better to lease or buy a phone?

It depends on your priorities and how often you upgrade. Leasing can be a good choice if you always want the latest phone and are okay with continuous monthly payments. Buying is often cheaper in the long run, especially if you hold onto a device for 3+ years. It also gives you more flexibility to resell, trade-in, or keep using an older phone.