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Leasing from Sprint? Beware: You could end up paying more than phone's full price

Mark Davis, The Kansas City Star on

Published in Science & Technology News

KANSAS CITY, Mo. -- Ryan Moody was frustrated when his Sprint phone mysteriously stopped texting and calling. But that isn't why he switched to Verizon before the week was out.

Moody learned that Sprint had been charging him $20 a month to lease his phone -- even though his lease had expired in April. To stop the payments, he had to give the phone back to Sprint, upgrade to a new phone with a new lease, or buy his current phone outright.

And Sprint told Moody that none of the $140 in extended lease payments he had made since April would count toward the $77 he would have to pay to own the Samsung Galaxy S6.

"It blows my mind that that's legal," said Moody, a 38-year-old Maryland resident. "They basically took $140 away from me because I'm naive."

Moody had contributed to what Sprint CEO Marcelo Claure calls "out-of-term revenue."

This is money that comes in from lease customers after Sprint already has collected the full price of the phone through their lease payments. In Claure's words, "that is all profit."

 

Sprint's program follows a legal and proven-profitable business model common in leases worldwide -- think leases on cars and photocopiers.

"If Sprint gets these people to go into this out-of-term phase, it's a cash cow. It's a beautiful way of making money," said Toni Toikka, CEO of Alekstra, which helps businesses optimize their cellphone plans.

It also is unique in America's cellphone market.

T-Mobile leases phones through its JUMP! and JUMP! On Demand upgrade programs. But T-Mobile said it doesn't keep collecting once the phone's original price tag has been covered.

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