O2 have announced they are launching a phone leasing service, an idea I speculated on several weeks ago, however the price is nowhere near as good as it should be.

O2 Lease, the first smartphone leasing service in the UK. Available initially through O2 retail stores and over the phone, O2 Lease enables new or existing O2 customers to lease a new smartphone for one year with no upfront payment for £55 per month including insurance, 750 minutes, unlimited text and 500 MB of data.

O2 Lease puts the latest smartphone technology into the hands of the people who want it with minimal barriers, little long-term commitment, no upfront cost, no two-year contracts and crucially, at £55 with insurance, minutes, text and data an affordable price point.

Now the service is based on a 12 month contract, rather than 24, and the £55 does include mandatory insurance (as I suggested it would have to) to protect their investment, so the potential savings aren’t as high as a 24 month model, but it still seems too high.

o2 contract equivalent phones to the leasing planThe flexibility will definitely be of interest to some people. O2 haven’t released details of exactly which handsets will be available, but the thought of a brand new iPhone or Samsung Galaxy handset every 12 months will be appealing. The closest contract to this is an 18 month commitment at £52.00 / month giving 1200 minutes, the same unlimited texts and the same 500MB data. Add insurance and you’re be right around £55. However on this contract you keep the device at the end of the deal. A Galaxy S II on this contract would be free, and the new Galaxy Nexus would be £59.99 – both phones would be worth considerably more than this in 18 months time.

So ultimately, while this is a good deal if you want maximum flexibility with your devices, it comes at a heavy price giving you no opportunity to recoup your costs by selling on your old hardware. Of course, as we reported earlier, too many people don’t ever do this anyway, so many customers are already wasting this money and a lease deal would make them no worse off.

Personally though this isn’t financially attractive enough for me to consider, if O2 had been prepared to make the monthly cost a little more attractive, based on the money coming back to them when the device was returned and re-used then I think more people would take advantage of this style of deal.

Update: It appears the scheme is only available for the iPhone4S, although additional handsets may become available if Leasing proves popular.