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Mobile phone leasing: How does it work?
Save on your mobile contract by opting to lease your phone, but only if you can keep the phone in good condition.
What is mobile phone leasing?
On a standard mobile phone contract, you pay off the cost of the phone over a fixed term – typically 24 months. At the end of that period, the phone is yours to use as you wish, even if you cancel your mobile plan and recontract with a different provider.
Mobile phone leasing plans work a little differently. While you still get a new phone and mobile service you pay off over a fixed term, you only get to keep the phone for as long as you remain on contract. If you want to end your service at any point, you have to return the phone or pay an additional handset fee to purchase it from your service provider.
In exchange for not getting to keep the phone, leasing plans typically offer a discount on your monthly handset repayments.
How much can I save with a leased mobile phone?
Currently, no carriers offer consumer mobile phone leasing in Australia. Both Telstra and Optus previously offered leasing plans, but these have since been pulled from the market.
Telstra was the first to offer mobile leases, with Optus following shortly after. The exact amount you could have saved varied slightly depending on the handset you chose and the base contract price you opted for, but the most you could save with either carrier on any given phone and plan combination was $10 per month. Therefore the maximum amount you could have saved over the contract term was $240.
Can I swap out my phone for another one?
Both Telstra and Optus did allow you to swap your leased phone out for a newer model after 12 months for a fixed $99 standard fee. However, this would put you on a new contract, which meant that in effect you leased one phone for 12 months then engaged in a fresh 24-month lease contract for your new handset. This was functionally the same deal as you'd get under Telstra's New Phone Feeling deal or Optus's New Phone Trade Up deal.
Saving up to $240 sounds great. What’s the catch?
The key factor to remember with a phone lease is that you never actually own the phone that you’re using, which can have some potential financial implications when your lease term is up, or if you decide to swap the phone out after 12 months. With a standard phone contract, when your contract term is up, you own the phone outright and can sell it, give it away or send it off for responsible recycling as suits your needs and mood.
With a phone lease, you’ve either got to arrange to buy the handset off the carrier, or hand it back to them. Both Telstra and Optus allowed you to continue leasing for a further six months once your contract was over, but unlike a standard contract where you can typically keep rolling over on a month-by-month basis, that was a hard six-month limit. As a result, the longest term you could possibly lease any handset for was 30 months.
If you do want to keep your handset, you can, but the carrier will charge you what they feel is a "fair market price". Given that most of the devices available for lease are premium phones to start with, that could prove somewhat costly, especially for iPhone devices that tend to hold their value over time. Because consumer mobile phone leases are relatively new there’s no real data available that shows what carriers are likely to demand for a phone at the end of the lease term.
If the phone is in fine working condition and you no longer want to keep it, you can always hand it back and conclude the contract. However, if there is some damage to the handset, you’ll be charged a repair price on the same terms as you would if you had swapped the phone out after 12 months. That means that a cracked screen will cost you $229, while a non-functional or otherwise damaged phone could cost you up to $499.
Are mobile phone leases worth it?
If you don't usually care about your phone after 24 months and you're mostly certain that you can keep the device in good working order over that time span, it’s a fine option to save yourself a not-inconsiderable $240 or so.
However, if your phones tend to only last you two years because they get bumped, cracked or broken, you might only save $11 in total over the term of the contract (a $240 maximum saving minus that $229 screen repair cost), or come out worse overall if the damage is more severe.
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