Tempted by Sprint and T-Mobile’s super cheap iPhone leasing plans? You might want to reconsider. Following a short-lived pricing war between the two carriers, both have quietly, and steeply, raised their respective leasing rates.
The monthly cost of Sprint’s iPhone Forever, a program which lets you lease an iPhone and swap it for the newest model every two years at no extra charge, jumped from $22 ($15 if you traded in your phone) per month to $26.39 per month to coincide with the carrier’s retirement of two-year contracts. T-Mobile’s Jump On Demand iPhone plan, meanwhile, now costs $27 if you decide not to trade in your current phone — a 35% hike from last year’s $20 rate ($15 with trade-in).
If you think those increases are dramatic, you’re right — Sprint and T-Mobile launched $1 and $5 per month iPhone lease deals just a few short months ago. Blame basic economics for the abrupt shift, say analysts. “Both companies had a lot of short-term promotions in place to leverage new iPhone sales to drive customer acquisitions,” Jackdaw Research’s Jan Dawson told Yahoo! Tech. “They [just] can’t afford to massively subsidize them indefinitely.”
That’s certainly a setback for those who were hoping to save a few dimes by leasing, and an about-face for carriers that once seemed intent on replacing two-year subsidized device pricing with low leasing rates. Tellingly, Sprint’s new monthly leasing plan is $26.39, a few cents short of the carrier’s $27 per month iPhone purchase plan.
In light of the changes, buying an iPhone outright is now much more economical than leasing one in most cases. Instead of leasing a phone for 12 months at Sprint’s current rate — a $316 proposition — you could pay full price and sell it for $300. “At the 13-month point, you are definitely at the break-even price,” founder of Recon Analytics Roger Entner told Yahoo! Tech. Leasing plans have other drawbacks to consider, too: T-Mobile won’t let you unlock a leased phone for a minimum of 18 months.
But don’t expect leasing to go away anytime soon. Although there may “no longer be a meaningful advantage to leasing” for consumers, said Entner, carriers stand to benefit. During an earnings call in early January, Sprint CFO Tarek Robbiati pointed to leasing as a “churn killer” because it allows Sprint to “re-engage” with customers at the leasing period’s conclusion. And it’s a lucrative revenue stream: Sprint can resell refurbished devices for profit, he said.
The era of two-year contracts and phone pricing may be over, but that doesn’t mean good deals on phones have followed suit. Leasing certainly isn’t one of them. Our advice? Pay full price for your next iPhone. It may be painful in the moment, but you’ll thank yourself when it comes time to upgrade.