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Lease vs. buy: Which is better for your next smartphone?

Buying a smartphone has changed a lot in the past few years. It used to be you would sign up for a two-year contract, make a $1 to $300 one-time payment and you wouldn't have to think about it again for two years.

However, now that carriers have largely phased out their contract plans, you have more buying options. You can buy a phone outright, sign up for a carrier payment plan or choose a leasing-style plan. Which one is the best?

In general, here's how the options break down:

Buy your phone upfront if: You want to switch carriers regularly; you plan to keep the phone for more than two years; you don't want monthly payments.

Get standard monthly financing if: You plan to keep the phone for more than two years; you don't want to pay a lot of money upfront; you don't mind being locked into a single carrier.

Get an early-upgrade leasing plan if: You want to upgrade your phone every year or sooner; You don't mind paying a little more for the privilege.

Of course, these are very general rules. There are many variations based on your carrier and if you're buying an iPhone or Android. To help you make a better decision, keep reading as we dive into the nitty-gritty details. First, we'll look at the iPhone and then Android.

iPhone

As you may know, the iPhone is not a budget item. The new iPhone 7 starts at $649 and the iPhone 7 Plus starts at $769. That's a chunk of change however you slice it, but what's the best way to do it?

One-time payment

If you plan to keep the same phone for many years, you want the flexibility to switch carriers at will and if you have the money, buying the phone outright from Apple isn't a bad idea.

Note: Apple does offer special financing plans for six,12 or 18 months through Barclaycard Visa with Apple Rewards. As always with promotional pricing, read the terms carefully so you know when interest and other fees kick in. You might be better off putting the purchase on an existing credit card with a lower APR.

When you buy an iPhone straight from Apple, it comes unlocked. That means you can switch carriers at any time you choose, and even go with smaller no-contract carriers that support the iPhone.

Pros: Owning the phone gives you the flexibility to keep it for a long time, or turn around and sell it right away if you decide to go with a different model or switch to Android.

Cons: Unless you're good at selling online, you could lose some money over other upgrade options. You need to have a good chunk of money saved up.

Next page: Options for financing and leasing an iPhone
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