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June 29, 2015

You May Not Own Your New Cellphone

Filed under: Electronics,Telephone — Edgar (aka MrConsumer) @ 6:07 am

  If you are about to get a new cellphone from Sprint or T-Mobile, you better read the fine print, because you may not actually be buying that phone. You may only be leasing it.


Sprint ad

That’s right. Sprint is turning back the clock to the 1950s when you paid a monthly rental fee to Bell for your black landline Western Electric telephone. The difference: you are responsible for repairs if you don’t have a costly protection plan or warranty, and that old phone really sounded good.

For the iPhone 6, $20 of your monthly payment for 24 months is a lease payment, because under this plan, Sprint owns the phone. What happens after the lease ends?

  • You can turn in the telephone, get a new one if you want, and pay its monthly lease payments.

  • You can continue leasing it at an undisclosed monthly cost.

  • You can buy it outright for an undisclosed “purchase option price.”

  • The first option assumes your phone is in “good working condition.” If it isn’t, or if you lose the phone during the lease term, you owe the balance of any yet-to-be-paid monthly installments plus the “purchase option price.”

    If you opt to buy your Sprint iPhone 6 at the end of the lease, they will charge you $200 according to a local Sprint representative. That makes the phone slightly more expensive than buying it outright to start.

    Not to be outdone, effective this week, T-Mobile joins the leasing world also, by offering Jump on Demand. It is an 18-month lease program that allows you to upgrade your phone up to three times a year. T-Mobile, however, adds all kinds of penalties if the phone you turn in is not in working order.


    You could be charged up to $750 in fines for the following:

    Cracked Screen Damage fee – $250
    Liquid Damage fee – $250
    Device does not power on fee – $250

    There are a whole bunch of other terms and conditions in both the Sprint and T-Mobile lease programs. It is getting to the point that you need a Ph.D. in cellphonery to understand all the choices, options, and terminology.

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    1. I was under the impression that most phone plans already worked this way. People do not buy the phones on a plan, they receive an initial purchase subsidy at the beginning of the contract and pay towards the phone over the contract until they can say they own the phone.

      I’ve never seen a plan where there was an additional charge at the end of the contract to own the phone. That’s new to me.

      At least this pricing scheme seems more transparent. Consumers know that the price of the phone is $20 a month for 24 months or $480 plus the price to buy at the end of the contract. When I used to buy contract phones they didn’t even specify that much.

      Comment by Wayne R — June 29, 2015 @ 9:54 am
    2. Proud to be a 10 year flip-phone owner!

      Comment by max — June 29, 2015 @ 2:02 pm
    3. “Proud to be a 10 year flip-phone owner!”

      Me Too!

      Comment by gert — June 29, 2015 @ 10:31 pm
    4. I’ve had my Samsung “smart” phone for about 10 years also. What a “smart” phone? Because it’s smart enough to know that it’s a phone and nothing more.

      Comment by Frankie — July 2, 2015 @ 12:51 pm
    5. The missing part of the story is the cost of the service plan. The old style of owning a phone after two years had you paying for it via a higher service rate…with the sneaky detail that the rate did not decrease when the phone was fully paid for. If the Sprint and T-Mobile plans are $20/mo cheaper than the subsidy/pay to own plans, then they are mostly fair deals.

      I like the trend of removing phone cost from the rate plan. If consumers see the true cost of phones, maybe the manufacturers will stop being able to charge such obscene markups.

      Comment by Marc K — July 7, 2015 @ 10:39 pm

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