The buy-or-rent decision comes to smartphones

Editor’s note: This article first appeared in Money Matters, a newsletter from Britannica Money, on August 12, 2026.

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When “free phones” stopped being free.

© ARAMYAN, Andy Dean/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

I still remember getting my first Motorola flip phone. It was literally “Kirk to Enterprise” in the palm of my hand. I wouldn’t trade my current smartphone for it, of course. Back then, it was mostly a way to make phone calls from the grocery store because I left the list on the kitchen counter. But now it’s my camera, GPS, music player, television, wallet, boarding pass, and I’ve even started dabbling in making it my AI assistant.

Now the way we pay for our phones may be changing, too. Apple recently announced plans to partner with financing platform Klarna on an iPhone leasing program. Instead of buying your next phone, you could lease it, much as you might a car. It raises an interesting question: Is the buy-vs.-rent decision coming to your smartphone? And is that a good thing?

Remember when carriers—Verizon, AT&T, and so on—gave away cell phones? There was a catch, of course, in the form of a contract: You agreed to keep your wireless service for two or three years. Cancel early, and you’d pay a hefty penalty. In other words, the phone wasn’t free at all. You simply paid for it over time through your monthly service bill, and the contract locked you into that carrier.

That model worked because the phones themselves weren’t terribly expensive. But smartphones changed the math. As they evolved from basic communication devices into pocket-size computers, prices steadily climbed, crossing the $1,000 threshold a few years back and causing the old model to break down. The phones had become too expensive to “give away,” but also too expensive for many consumers to swallow in a single purchase.

So they changed the deal instead of the phone. The long-term contract disappeared, replaced by monthly payments for the device itself. At the same time, carriers began offering rebates that were paid out a little at a time as credits on your monthly bill. Nowadays, you can typically pay off a phone whenever you want, but you’ll likely forfeit the remaining rebates. It’s no longer a contract per se, but the financial incentive to stay with your carrier remains.

I’ve never leased a car—it always seemed like a bad deal for a value-conscious control freak like me. I tend to keep a car for at least 10 years, and I could never live with the mileage restrictions and other rules leases carry. But people who choose to lease certainly have their reasons. The monthly payments are usually lower because you’re paying for the vehicle’s depreciation during the lease—not its full purchase price. In return, you get a newer car every few years with the latest technology, safety features, and other bells and whistles, without worrying about selling it or what it’ll be worth at trade-in time.

Smartphones have started checking many of those same boxes. The latest flagship models can cost more than $1,200, they depreciate quickly, and quite a few of us upgrade every two or three years. Many see this as a win-win. We consumers get a lower up-front cost, and we’re always equipped with the latest technology. Apple gets recurring revenue and a steadier stream of customers.

Me? I usually want a new phone about the time my carrier rebate runs out. By then, the screen is cracked, and the battery doesn’t seem to hold its charge. But I’m not about to leave money on the table by replacing it six months early.

I also know people who couldn’t care less. They’ll happily keep an older phone because they like its size, don’t need a better camera, or simply don’t see enough improvement to justify replacing a device that still works. Some even keep limping along for years after the charging port quits, relying on a wireless charging puck instead.

Apple’s proposed partnership with Klarna isn’t a done deal, but it offers a glimpse of how we may pay for smartphones in the future. If smartphone leasing catches on, deciding whether to lease or buy a phone may become a lot like deciding whether to lease or buy a car.

My old flip phone couldn’t stream music, take professional-looking photos, or answer questions with AI. And sending a text meant pecking away at the number pad one letter at a time. But I owned it. Whether that’s still the right financing model for tomorrow’s smartphones is a decision we may all have to make in the not-too-distant future.