iPhones now available on lease

Lease option introduced by O2

A new initiative has made it possible to lease the latest model of iPhone instead of buying one, meaning that consumers can use the handset for 12 months, then have the freedom to choose a new model.

Mobile network O2 has introduced the scheme, charging £55 each month for an annual lease agreement for an iPhone 4S.

Traditional mobile phone contracts allow the user to keep the handset - but the initial fee and contract length depend on its value. For an iPhone, this can mean a hefty sign-up cost and a lengthy agreement period.

The cost of a monthly O2 contract ranges from £299 upfront plus £21.50 per month, to no upfront fee plus £63 per month. However, this is based on 24 months of payments.

The lease agreement includes 600 minutes of talking time (750 initially, for an unspecified offer period), unlimited text messaging, 20 picture messages and 500MB of data via internet use.

Buy or lease?

Based on the same tariff allowance, the costs for one year would compare as follows:

An iPhone 4S lease:

  • Upfront cost: None
  • 12 monthly payments: £55
  • Overall cost (year 1): £660
  • An iPhone 4S contract:

  • Upfront cost: £99
  • 12 monthly payments: £42
  • Overall cost (year 1): £603
  • Overall cost (year 2): £504
  • The contract is cheaper - especially over two years, as for the second there would be no upfront cost. However, if the user wanted a new handset for the second year, they would need to obtain it separately and continue the agreed monthly payments.

    The lease offers the freedom of choosing a new phone and agreement upon its conclusion. However, it is more costly per year - and the user would need to ensure they return the phone in good condition.

    O2's terms and conditions state: "With O2 Lease, the phone isn't yours and if you don't return it in satisfactory condition at the end of your lease, you may have to pay substantial charges."

    Mark Baker, online marketing manager at theEword, said: "The lease option is a great choice for people who want a cost-effective method of ensuring they can use the latest product every year.

    "The introduction of leased iPhones may well lead to a significant rise in the number of people using the most cutting-edge smartphones available."