What is a Device Payment Contract?

Understanding device payment contracts

Every year, technology giants — Apple, Samsung, and others — release newer and upgraded versions of smartphones into the market. For tech enthusiasts, the release of a new mobile device is an immediate call to upgrade.

Unfortunately, not many individuals are fortunate enough to be able to upgrade their devices right off the bat, given how pricey newly released devices are. Thankfully, many telcos have provided a solution to situations such as these; device payment contracts.

Device payment contracts (DPCs) are agreements which allow individuals spread the payments for a mobile device over a 12, 24, or 36-month period. In other words, these contracts allow you pay for your desired mobile device in installments. While some telcos offer DPCs for both mobile phones and tablets, contracts on tablets are relatively scarce.

Types of device payment contracts

The fine print for all device payment contracts are not the same. There are two major kinds of device payment contracts:

  • Phone lease plans and
  • Payments in installments.

Phone lease plans

Phone lease plans are service plans provided by telcos, which allow existing subscribers on their network rent selected mobile devices from them. These devices are rented for a stipulated amount of time provided in the contract between the telco and the customer. This could be anywhere from 12 to 36 months.

Despite the many consumers that purchase such plans, surveys show that most Australians really don’t understand how phone lease plans really work.

Australians don’t understand phone leasing.

Over 83 percent of Australians have no idea of how phone leasing works. Source: Whatphone

On a phone lease plan, the subscriber is expected to pay the telco a stipulated amount of money every month until the contract is ‘paid off’. The clauses that end a lease contract differ according to the telco from where the device was acquired from.

With some telcos, the subscriber is given the option to return the phone or renew the lease contract with a higher device model. With others, the device can be obtained at a ‘fair market value’. With all telcos though, the payments made during the contract are not for purchasing the device — the device belongs to the telco before, during, and after the contract, unless purchased after the contract is over.

It’s important to note that should the device incur any damages whatsoever during the lease period, the consumer will be held liable and can face steep repair fees as issued by the telco.

Payments in installment

Payment in installment plans are similar to phone lease plans in that individuals looking to procure a mobile device enter a contract with a telco that will provide them with the device.

A monthly fee is paid to the telco by the individual over a set period of time — likely 24 to 36 months.

At the end of the contract period, the subscriber would have paid the full value for the device, making it their own property.

With some telcos, upgrading your device while on an installment plan is a possibility. Upgrading your device will cost you a fee. If you are interested in frequent upgrades, it is important that you check with the telco before entering a payment contract with them.

Pros of phone lease plans

DPCs afford individuals numerous benefits. For example:

  • Saving on your monthly phone bill — Phone lease plans can help you save up to $10 on your monthly phone bill. This is because you’re merely leasing the phone with a phone lease plan.
  • Frequent phone upgrades — for subscribers who like to upgrade their devices frequently, phone lease plans are a perfect option. Buying a device at full value would eventually incur more cost every time you wanted to upgrade.

Cons of phone lease plans

  • Damage fees — perhaps, the most terrible disadvantage of DPCs are damage fees. If your device incurs any damage within the lease period, the fees to be paid are extremely exorbitant.
  • Stiff contracts — the contracts offered by some telcos are very stiff and may end up leaving you unsatisfied with the mobile device. This applies to both phone leasing and payments in installment. Before committing to a device payment contract, understand as much of the fine print as you can.

Final words

Device payment contracts are agreements entered into by the subscriber and telco or phone company. In these agreements, the subscriber is expected to pay a stipulated amount of money per month — or however the contract states. Such contracts are either leases (where the device will be returned or traded for another after the contract is exhausted) or payments in installment (where the device is owned after the contract is exhausted).

Sources

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.