Should you still buy your next smartphone — or subscribe to it instead?

The smartphone industry is shifting its focus from the actual phones themselves to the methods of acquiring them. As premium devices become increasingly costly, Apple, Samsung, and others are exploring leasing, subscriptions, and guaranteed buyback programs to make upgrading more appealing. Apple's recent launch of Apple Upgrade in the U.S. in collaboration with payment platform Klarna enables users to lease iPhones, Macs, iPads, or Apple Watches on a monthly basis, with the option to upgrade, return, or eventually purchase the device.

Samsung, on the other hand, has been providing its Galaxy Forever program in India, which combines financing with a buyback guarantee to facilitate predictable upgrades to flagship Galaxy smartphones.

Apple's CEO, Tim Cook, announced the Upgrade program during the company's earnings call, aiming to simplify access to the latest products for customers who prefer regular upgrades. Cook stated that Apple's high resale values make this leasing model suitable for such plans. The industry's transition towards these new ownership models is driven by consumers keeping their smartphones for longer periods due to rising prices, limited hardware upgrades, and the growing refurbished market.

Analysts predict that the global replacement cycle for smartphones will reach four years by 2026, up from 3.5 years in 2025.

The challenge for manufacturers is not only to encourage frequent upgrades but also to demonstrate that these new ownership models are financially advantageous compared to outright purchases. Matt Schulz, chief consumer finance analyst at LendingTree, explains that leasing might not be suitable for everyone but could be beneficial for those who upgrade frequently.

Similarly, IDC's Navkendar Singh emphasizes that these programs aim to maintain margins and customer retention as premium prices increase, rather than merely encouraging shorter upgrade cycles. Smartphone makers are increasingly integrating these models into their ecosystems to retain their customers.

While leasing and subscription options have been prevalent in the U.S. wireless market, phone manufacturers are now attempting to dominate this relationship. The interest-free financing and aggressive trade-in offers provided by carriers have contributed to Apple and Samsung's dominance in the U.S. smartphone market, which together hold over 80% share, according to IDC.

The trend towards alternative ownership models is also attracting startups like BytePe in India, which offers subscription-style plans for smartphones and other consumer electronics, with over 80% of its customers opting for subscriptions over traditional purchasing methods. This shift towards leasing and subscription models is expected to extend beyond the U.S. and India, with more companies adopting these strategies to increase customer lifetime value, secure a steady pipeline of trade-in devices, and facilitate certified refurbishment and resale.