What Are EIPs (Equipment Installation Plans) and How Do They Affect Phone Contracts?

The smart device and mobile phone service industry has radically shifted over the last few years. Now, it's no longer common to simply go to a store and pay for a phone in cash. If you want one of the newest, hottest smartphone devices in your palm, you'll have to pay for it over time if you're an average American (and can't afford up to $1000 upfront!).

If you pick up your phone through one of the major phone service providers, odds are you sign an EIP or equipment installment plan. Today, let’s break down what EIPs are, how they work, and their pros & cons so you know what to look for before signing up for a new payment plan.

What Are EIPS?

EIPs are equipment installation plans. In a nutshell, they are designed to be affordable means for regular Americans to purchase flagship mobile devices and other expensive equipment.

Think about purchasing a house. Most Americans can’t afford the $250,000-$500,000 necessary to buy a home outright. Instead, they make a down payment, then take out a mortgage loan. Each month, they make a payment toward the mortgage loan to gradually pay down the value of their house.

The advantages of a mortgage are the same advantages of an EIP. If you buy a phone through an EIP, you don’t have to pay $1000 to get the hot new device on the market. Instead, you can pay an affordable monthly fee of less than $100 for several months while still getting to use your device instantly.

EIPs are just loans for phones. However, many EIP providers, like Verizon, don’t include interest fees or APRs. So you don’t have to pay more than the phone’s initial cost over time.

Of course, mobile phone providers like Verizon and AT&T also provide mobile services. They usually tie those services to their EIP. So when you buy a new phone from a provider, you also sign up for mobile service from that provider for 36 months or three years by default.

Benefits of EIPs

• Get Your Phone, Then Pay
• EIPs Make Flagship Cell Phones Accessible
• They Incentivize Consumers to Remain with Carriers

Get Your Phone, Then Pay

There are lots of benefits of EIPs that make them attractive for mobile phone providers and consumers.

The most significant benefit for consumers is that they can immediately acquire a new mobile device like a smartphone or tablet. Then they can pay down the value of that mobile device over time.

Say that you want a new iPhone 13 Pro. However, according to its price tag, you don’t have the nearly $1000 necessary to buy that phone. Instead, you can buy the phone with an EIP from a mobile phone provider and start enjoying it immediately.

Over the next few years, you can pay off the value of the mobile device using your new phone. Given that technology evolves frequently, this is a better way to enjoy top-of-the-line machines than waiting for several years (when a new device has likely already usurped the previous top dog on the market).

EIPs Make Flagship Cell Phones Accessible

Secondly, EIPs make the most powerful flagship devices accessible to the average American. Many of the best new phones are well over $700 right out of the gate. Some cost even up to $1500 or more.

Most Americans can’t afford to drop $1000 or more immediately, especially on something like a new mobile phone. But they can afford $25 per month payments over three years.

They Incentivize Consumers to Remain with Carriers

There’s a significant benefit for carriers, as well: incentivized long-term service plans. We’ve already seen service carriers leverage this advantage by switching their standard phone plan length from 24 months to 36 months.

In essence, if consumers have to pay off their phones for 36 months, they must stick with a carrier for three years until their phones are paid off unless they want to face early termination fees and other penalties. Given that most mobile service carriers are in constant competition with each other, the benefit here is obvious.

While all three carriers offer Equipment Installment Plans (EIPs) to help customers afford new devices, there are some differences in terms of their offerings:

Equipment Installment Plan: AT&T

• AT&T offers a wide selection of devices to choose from.
• Flexible terms may include various payment options and contract lengths.
• AT&T may provide exclusive deals or promotions for EIP customers.

Equipment Installment Plan: T-Mobile

• T-Mobile's EIP often includes perks like zero down payment options and no interest charges.
• T-Mobile's JUMP! On Demand program allows for more frequent device upgrades.
• T-Mobile typically emphasizes flexibility and simplicity in their EIP offerings.

Equipment Installment Plan: Verizon

• Verizon may offer exclusive deals and discounts for customers using their EIP.
• Verizon's EIP may include options for low monthly payments and special financing.
• Verizon's network coverage and reliability may be factors to consider for some customers.

What Risks are Involved with EIPs?

While EIPs have some advantages, there are also some downsides to keep in mind.

Consumer Risks

The considerable risk to consumers is being stuck with a bad service carrier for several years under the threat of an early termination penalty. If a consumer is a year and a half into a three-year contract, for instance, but they find that their carrier doesn’t have excellent service in a new area, they have to stick it out or pay the early termination fee to swap to a new carrier.

On top of that, to get out of EIP plans, consumers usually have to return their devices or pay off the remaining balance if they want to keep them. Since many mobile phones with EIPs have high price tags, this is untenable for most Americans.

This will likely cause most shoppers to evaluate phone service carriers and providers carefully before signing on the dotted lines. You can no longer usually stick out a two-year agreement with a service carrier; now, you’ll be stuck with a three-year deal in most cases.

Carrier Risks

On the carrier side, the most significant risk to using EIPs is potentially high debt potential. For example, imagine a customer who buys a $650 iPhone from a carrier. After a few months, however, they stop paying their monthly bill.

At this point, there’s not much the carrier can do aside from reaching out to debt collection agencies. Even then, there’s no guarantee that the carrier will ever recoup its cost on the initial investment for the iPhone.

Essentially, carriers must be careful who they offer EIPs to and when. This may lead to an increased requirement for credit checks for consumers before they qualify for EIPs for high-priced devices. Some carriers are looking into remote disable technology to turn off customer devices if they stop paying their EIPs.

The Future of EIPs

Ultimately, EIPs will likely be a mainstay of the mobile phone industry for years to come. Until prices for mobile devices drop drastically, it will be more practically convenient and economically affordable for average Americans to buy phones through EIPs instead of saving up hundreds or thousands of dollars to buy them outright.

Fortunately, you can use resources like Navi to find out the best mobile phone providers and the best mobile phones to buy. That way, when you sign up for an EIP, you don’t waste your time with a subpar device or plan!

Frequently Asked Questions

What is an equipment installment plan?

An equipment installment plan (EIP) is a financing option that allows consumers to purchase smartphones by making monthly payments over a set period rather than paying the full price upfront. 

What is an equipment installment plan with T-Mobile?

The T-Mobile Equipment Installment Plan (EIP) is a financing option that allows customers to purchase devices like smartphones, tablets, and wearables through manageable monthly payments instead of paying the full price upfront. The repayment period typically lasts 24 months. 

How long are AT&T installment plans?

AT&T's equipment installment plans typically last for 36 months. This duration applies to most new phone purchases and allows customers to spread the cost of their devices over three years with low monthly payments and 0% APR.