Are there really enough new phones coming out every year to need or even want to upgrade 3 times a year? And, what if there were 2-3 major carriers doing this "JUMP on Demand" type of promotion? Wouldn't manufacturer's ideally need to come out with new phones more often for this to make sense? And still, with more handsets being manufactured and needing advertising, wouldn't this create an over-saturation type of market?
I would think they would order less product and then use the trade-ins as refurbs and resells for warranty and other purposes. Think, they lease a phone for 6 months then sell it as a refurb and basically make the remaining 66% money remaining to break even and profit off of one phone, if even only a small amount. It's still more than they would make if they sold one phone outright.
Similar to what we did in Rent-To-Own: Take a 500 sofa, rent it out for $40 bucks a month, after 6 months the customer would default or return to start another lease on another sofa. Then, we took off a supposed 20% due to being pre-leased. So, that $500 sofa is still valued at $250 but we charge $400. If the 2nd lease completes, we make $250 (1st lease) + $400 (end lease) = $650 - the $100 (20%) = $550. This doesn't factor in cost, which would be probably $375 meaning we profit 25% maybe 33%. BUT, say we lease it again after another default or exchange.....we don't take another 20% off. It remains at the 80% price and continues to be re-leased again at $40 a month for another 6 months (assuming it isn't stained, broken, etc...) Some items pay out, some are cash, some can be returned 4-5 times a year. Of course there are other variables like cash price vs full term lease price. But, knowing the industry, almost all items get returned one way or another until they sell cash discount sale, or are charged off as destroyed. Best example was a PS3. $85 a month for 52 weeks. That's $4,420 if someone went full lease. No one does that. Game consoles, if they weren't charged off as theft by an AWOL customer (which we already made back what we paid plus some) are exchanged and rented, brought back, and defaulted on monthly. All that to say....T-Mobile might save on production costs and make money at the same time.
Besides, T-Mobile caters to the hipsters. They will exchange an i for a + and an S for the next on a regular basis.
But the lease is so cheap. Or am I missing something? I know they require protection plan....
I May have missed something about trade in value. Or, like you said, you just start over and t-mobile makes a bundle selling the same phone over and over.
The lease is cheap because you trade in a phone and the prices won't stay that way. For some people like me going through multiple devices without having my boss buy them saves them money. So they'll take advantage of it in the long run they save money. However those who don't have a lot of money would benefit buying the refurbished units. So it may end up being a wash or T-Mobile might make a small profit in the long run.