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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

"The advantage the lease gives you, it gives you something that is called out-of-term revenue," Claure said during an investor conference in New York that Sprint made available to the public on its website.

"There comes a point in time," he said, "in which customers start paying -- they have already paid for their handset -- but they decide to continue to lease your handset and use it. That is basically, that's as good or better than service revenue because that is all profit."

Claure also said the out-of-term revenue is enough that it helps Sprint operate with a higher rate of customer turnover than its rivals.

Out-of-term lease customers tend to churn, or drop Sprint service, more than others, Claure told his investor audience. But Sprint has run "business cases," he said, that show the extra revenue from out-of-term payments makes up for the higher churn.

"So that is how we have decided to run our business," Claure said.

How it works

 

Sprint has leased phones for several years and introduced a new leasing program in July called Sprint Flex. Although there are some differences with Flex, the lease plans work the same when it comes to out-of-term revenues.

Sprint sets monthly lease payments so that by the end of the lease the company will have collected about 75 percent of the phone's price. This means a 30-month lease comes with a smaller monthly payment than with the same phone under an 18-month lease, which is the only lease length available under Sprint Flex.

During the lease, many customers upgrade to a new phone and a new lease. Sprint Flex allows an upgrade after one year under lease.

At the end of the lease, customers still can upgrade. They also have the option of buying their phone.

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