Lease your next smartphone - starting with the iPhone 4S

From the thinnest televisions to the slickest tablets, from ultra-light notebooks to super-fast broadband, technology just keeps getting better. But the cost of keeping up with the latest and greatest gadgets mean that most of us end up stuck with what we’ve got for a while before we can buy the next big thing.

Nowhere is the pain of being unable to upgrade more obvious than when it comes to our phones. Most of us are locked into 18-, 24- and even 36-month contracts, often with no hope of being able to move to something a bit more exciting until the contract is over.

But now, one carrier thinks they’ve got a solution to the problem. The Guardian reports that UK operator Telefónica O2 has announced the introduction of a new smartphone rental tariff, which it believes will be perfect for buyers who don’t want to be tied down for years at a time.

The O2 Lease service is launching with a single handset, for now at least – Apple’s iPhone 4S. For £55 GBP ($86 USD / €65 EUR) per month, subscribers get 750 minutes of talk time to any UK network, unlimited text messages, 500MB of data, and inclusive insurance, as well as an iPhone 4S 16GB. For an extra £10 ($15.50 / €12) per month, users can get the 32GB version instead.

Subscribers sign up for a 12-month lease period, after which they must return the phone to O2; they can then choose to upgrade to the latest model, or they can simply walk away. 

There are potential savings to be made. If a buyer wished to purchase a one-year contract, the iPhone 4S 16GB would cost £139 ($217 / €163) up-front, plus £51 ($80 / €60) per month for the service; if the buyer required insurance, this would be an additional £10 per month. But the key difference is that under a normal non-lease contract, you own the phone at the end of your term, an asset that can be sold to recoup some of the cost of the contract back. Under the lease agreement, you've paid nothing up front, and you can upgrade after 12 months, but you've got nothing to show for it, apart from a stack of receipts from O2.

Whether or not you believe this to be an intelligent deal depends on your priorities when purchasing - if you can afford to pay a sum up front, then a standard contract, in which you own the phone and can eventually sell it, makes sense; if you prefer the flexibility of more regular upgrades without paying a lump sum when you sign up, leasing seems like a reasonable compromise. O2 certainly believes that the new service will resonate with consumers. The company’s marketing director, Sally Cowdry, says:

Customers and small business are used to leasing everyday items, from cars and washing machines, to photocopiers and office space. They understand how it works and what the advantages of leasing are. We have simply taken this idea and applied it to the smartphone market. We believe the result is a new model that will challenge the industry and its customers to look at the UK’s mobile landscape with fresh eyes.”

Whether this transforms the industry in the way O2 hopes remains to be seen, but anything which broadens the range of available options for consumers is a good thing. O2 told the UK tech news site The Inquirer that if the idea takes off, they hope to widen the offering to incorporate other devices. 

O2 is no stranger to trying new things - two years ago, it launched the Giffgaff network, which devolves the majority of its customer service, marketing and sales responsibilities to its own users, offering bonuses for solving problems and answer questions for other users. It offers contract-free 'goodybags', which users can purchase to top up their airtime; for £10 per month, users get 250 minutes of talk time, unlimited text messages and genuinely unlimited mobile data - but users have to bring their own phones to the party.

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