The Residual Leasing Argument for Mobile Devices

South Africans are generally familiar with the idea of residual leasing in the motor industry. We rent a car for a period and trade it in for a newer model at the end of a contract, limiting the financial and inconvenient burden of an aging and depreciating asset. The benefits of leasing a car are widely known:

  • Access to newer vehicle models more frequently
  • The ability to drive a car you may not be able to afford to purchase
  • The ability to derive utility from a depreciating asset without incurring the loss of value in a personal capacity
  • No need to incur the inconvenience of selling the car at the end of your lease
  • Shorter contract terms than typical instalments applicable when purchasing a vehicle 
  • Depending on the contract structure, maintenance, insurance and repairs may be included

Leasing sees a consumer paying for use of an asset for a predefined period of time. Whereas in the motor industry, this averages between 3 to 5 years, in the mobile rental industry, contracts range between 1 to 2 years.

When leasing a car, consumers generally have 3 options when it comes to the end of their lease period:

  1. They can return the car and lease a different/newer model
  2. They can purchase the vehicle at its residual value (if this is an option from the dealer)
  3. They can continue to lease the vehicle and refinance based on the residual value of the vehicle

The very same principles apply to the rental of mobile devices with YBuy. Let’s consider the following case study.

Johnny wants the Samsung S20 Ultra (retailed at R24 000). He can either get the phone on contract with his network provider or he can rent the device from YBuy.

Let’s explore both options over the course of a 1 and 2 year period.

The YBuy Value

In year 2, YBuy offers you the opportunity to refinance your mobile device at its residual value rather than its original cost. This presents a significant monthly saving on your premium, compounded by the unparalleled included value of repairs, insurance, and accessories included in your YBuy proposal. Now imagine that multiplied across an entire organization’s devices and the financial incentive becomes really material.

Months 1 - 12

YBuy Contract Inclusions

  • Samsung S20 Ultra
  • Screen cover
  • Charging cable
  • Charging adaptor
  • Insurance
  • Repairs

Monthly cost: R1278

Approximate value of extras (at no additional cost to the client): R410 per month (30% value add)

Network provider contract inclusions

  • Samsung S20 Ultra

Monthly cost (hardware only, excludes the cost of voice and data services): R1167

Options

  1. Johnny can return the phone and upgrade to a different model with a new lease agreement
  2. Johnny can buy the phone from YBuy at its residual value
  3. Johnny can continue leasing the phone from YBuy but at a lower monthly premium due to the phone’s lower residual value, see below
  4. Return the device and exit contract with zero fees

N/A Johnny is locked into his contract

Months 13 - 24

  • Samsung S20 Ultra
  • Accessories
  • Insurance
  • Repairs
  • Surplus stock

Monthly cost: R826

Approximate value of extras (at no additional cost to client): R410 per month

  • Samsung S20 Ultra 

Monthly cost (hardware only, excludes the cost of voice and data services): R1167

Total cost after 2 years

R25 248

R28 008

The YBuy Value

In year 2, YBuy offers you the opportunity to refinance your mobile device at its residual value rather than its original cost. This presents a significant monthly saving on your premium, compounded by the unparalleled included value of repairs, insurance and accessories included in your YBuy proposal. Now imagine that multiplied across an entire organisation’s devices and the financial incentive becomes really material.

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