Phone financing, better known as equipment installment plans from all four of the major U.S. carriers has been great for consumers. This process has made it easier for customers to get a hold of the smartphones and other devices they want without having to fork out hundreds up front while signing a two year contract. In the end customers end up paying more for their device as the phones actual retail cost is broken up over their bill, but that's the small price to pay for saving hundreds more up front. EIP has become a big part of the carrier offers these past one or two years, and analysts believe that T-Mobile, Sprint, Verizon Wireless, and AT&T are slated to finance an estimated $37 billion in devices by the end of 2015.
This goes off of data from the carriers that stated they financed more in phones in the fourth quarter of 2014 compared to the previous quarter. T-Mobile finances nearly all of its phones since all of their Simple Choice plans are contract free with EIP options. Verizon financed 12 percent of their devices in the third quarter of 2014, reporting that number jumped by 13 percent to a total of 25 percent(one fourth of their phone sales for the year)of their devices being financed in Q4 of 2015. Sprint reportedly financed 46 percent of their devices, while AT&T seems to have financed the second largest number of devices totaling 56 percent in Q4 of 2014.
In day's past, carriers made their money on contract plans so they could afford to give devices out at discounts. While in theory carriers will make all of the money back on devices they finance out if customers actually pay them off in full over time, there is a risk involved that customers may not, so carriers are likely to be looking at ways to manage the risk of this scenario, which Fierce Wireless reports may be a process called securitizing future EIP payments that carriers are requiring from customers if they want a phone for as little as $0 down, although not all devices are financed out at that low of a cost.
According to analysts at Jefferies, sales completed via financing and leasing plans across all four major U.S. carriers in 2015 are going to account for over half of all postpaid phones sales. This leads them to believe that the total amount in financed phones this year will be roughly around $37 billion. They expect that number to raise by $13 billion by the end of 2017 coming to a total of $50 billion, which suggests that they estimate financed device sales are only going to continue to grow.