So, is there a better solution for this wasteful cycle, one that could actually save you money too.
Rather like car leasing, why don’t the network operators start phone leasing? At the moment when you take out a contract, when it’s finished you own the device, often the contract alone secures the cost of this device, sometimes it isn’t enough and an upfront fee is charged to address the balance a bit.
But what if at the end of your contract you didn’t own the device? You simply sent it back to your network of choice and then had a new one sent through? Just like car leasing. How much cheaper could this make things?
The network would own the device, and calculate its end of contract value, and could adjust your plan accordingly. Lets run some very rough, unscientific numbers.
So, at the moment, an iPhone4S (16GB) on Orange is free on a 24month plan at £46.00 / month – a Total Cost of Ownership (TCO) of £1104, or £99 upfront cost at £36/month for 24 months, a TCO of £963. Now lets say you’re upgrading from an iPhone3GS to the 4S which is the cycle for people who took out a phone 24 months ago. What’s the 3GS worth to you now? Well assuming you do actually sell it (and not leave it in said drawer) and its in “excellent” condition, sellyourmobile.com would give you £122.20 (at time of writing) as the best price for it. The 3GS new was £449 so its a fair comparison to the £499 iPhone4S (both 16GB).
At £46/month you’re now looking at £1104 minus £122.20 making £981.80, and at £36/month £840.80.
What would phone leasing get you? Its hard to say, obviously there would be no upfront cost, so the £36/month deal would immediately be £99 cheaper dropping the TCO to £740.80, and then the network would be getting the handset back too, at I’m sure much better prices than sellyourmobile.com are offering, but lets use their value as the example. So £740.80 minus the buy back value of the phone at around £120 takes us to £620.80 – a TCO saving of £342.20. £620.80 \ 24 gives us a roughly monthly contract value of £26.
Based on this, would you be interested in leasing an iPhone4S at £26/month with no additional fees, knowing that at the end of 24months the phone wasn’t yours, you needed to hand it back, but that you would receive a brand new phone in return for a further 24 months? I certainly would. Admittedly these are very rough numbers, but I’m sure the networks operating on much larger volumes could improve the savings beyond this example.
There would be a couple of issues:
New customers to the network might need to give an initial ‘deposit’, but this would only make the monthly rental cheaper still, not increase the total cost. Longer term, valued, customers could probably be trusted to just have the phone without deposit, certainly from the first renewal onwards.
Customers would also be responsible for the care of the phone, so that at the end of contract it came back to the network in a good condition. But a simple insurance plan tacked on to the contract could easily take care of that. Plus many people are already paying an insurance plan now, so to them it would make no difference to the numbers.
Overall I think leasing phones would be a popular option with many people, giving them a new handset at a much reduced cost, with the ability to simply send the phone back at the end of 24 months and get a new one. Exactly like car leasing.