Mobile phone installment plans seem to be a growing hit among consumers, according to research from Kantar WorldPanel ComTech.
During the three months ending August 31, 47 percent of the smartphones sold in the US were linked to installment plans, Kantar research chief Carolina Milanesi said on Wednesday. Over the same period, purchases made via standard contracts accounted for only 20 percent of sales. The rest were linked to prepaid plans.
The trend was similar among iPhone and Android buyers taking the installment road but showed differences in the standard contract vs. prepaid route. From June through August, 51 percent of iPhone sales were made through installment or off-contract plans, 37 percent via traditional contracts and 12 percent with prepaid plans. For the same period, 46 percent of Android phones were sold through installment or no-contract plans, 15 percent via traditional contracts and 39 percent were prepaid.
In the olden days, smartphone buyers typically bought their phones for a subsidized amount that locked them into a two-year contract. But now all four major US carriers -- Verizon Wireless, AT&T, Sprint and T-Mobile -- offer or force you to accept plans that require you to pay for or lease the phone in full with the option to upgrade to a new phone after a certain period. Such an option requires you to either pay for the phone upfront or shell out extra dollars each month toward its cost. The safe bet would be that consumers would avoid plans that force them to pay the full retail price of a phone rather than the cheaper subsidized price. But the opposite is happening, according to Kantar's data, most notably with certain popular phones.
Over the three months from June through August, 55 percent of iPhone installment plans were for an iPhone 6, while 22 percent were for an iPhone 6 Plus. Among Samsung phones bought on an installment plan, 36 percent were for the Galaxy S6, while 12 percent were for the Galaxy S6 Edge.
Apple jumped on the bandwagon last month when it introduced its iPhone Upgrade Program, which offers you the ability to upgrade your phone every year by paying it off through a monthly installment. Could Apple's installment plan option hurt the carriers? Not necessarily, but it will help Apple in key ways, according to Milanese.
"Given that only 8 percent of iPhone sales went directly through Apple in the three months ending in August, this program might not be the threat to carriers some imagined, but it will offer Apple a way to strengthen its relationship with customers," Milanese said. "The program also will help Apple get more of the previous generation's devices into the refurbished market."