Do I Own My Contract Phone?

“Do I own my contract phone?” is a pretty common question, and the answer may not be as obvious as one might think. At, Ryebread761 writes:

I have been wondering lately: do I have full ownership of my contract phone? I — and many others — bought a phone on contract. This brings the cost of a phone like mine (iPhone 4S) from around $700 down to around $160. So I have been wondering, while I am tied to the contract, do I own my contract phone? Does it depend a lot on my carrier? Is there a general rule of thumb for all carriers (including Canadian and other, outside-of-the-US carriers)?

Do I Own My Contract Phone?This is a good question, and one that may have multiple answers. The basic gist of the agreement is that you own your phone about as much as you own things purchased with your credit card. Some regional laws may require that you give up the device if you default on the agreement while others allow you to keep the product in exchange for a hit on your credit report and the potential loss of your mobile coverage until you make good on the amount you owe. Either way, your ownership depends entirely on the agreement you signed when you took possession of the phone.

So… do I own my contract phone?

The general rule of thumb is to consider the phone purchased on credit until your contract is up. Your carrier is really nice to you every two years because those subsidized phones are actually hooks that allow carriers to lock you into a binding contract.

The best strategy for you financially is to buy the phone at full price and enjoy the savings of a month-to-month plan. You end up spending a lot less this way over a period of two years than you would if you had taken the cheaper phone on contract. Why? Because on one hand, the carriers are competing for your service, while on the other, they have you locked in.

There’s no such thing as a free phone. Consider your options.

Your financial freedom may be more important than short-term savings, especially if that contract keeps you stuck to a carrier and device with which you’re not particularly pleased. This is the main focus of T-Mobile’s new position. No contracts; no surprises. It’s this train of thought that makes T-Mobile and companies like it the carriers to watch over the next few years. It’ll be very interesting to see whether the subsidy plans we know today are going to stick around for the next five years.

Image: Phone shared by jonathanb1989 via Flickr