Costlier smartphones are making EMIs the new normal

For years, the biggest question for smartphone buyers was which model to choose. Increasingly, the first question has become: How will I pay for it?That shift says as much about the Indian smartphone market as it does about consumer behaviour.

Over the past six months, handset prices have steadily climbed as manufacturers grapple with rising memory costs, costlier components and the growing hardware demands of artificial intelligence.

The result is that financing is no longer just a convenience. It is becoming the default route to buying a new phone.Counterpoint Research estimates that financing — spanning non-banking finance company (NBFC) loans, credit card EMIs and debit card EMIs — will account for 42% of India's smartphone sales in 2026, up sharply from 35% a year earlier.

In other words, nearly one in every two smartphones sold this year could be financed rather than purchased outright.The trend is unfolding alongside one of the broadest rounds of smartphone price increases India has seen in recent years.The price hike has been gradual and not at the top-end, which is where one would assume most EMI transactions would be happening. But brands are now launching phones at more than expected prices and passing on the components cost to the buyers.

A phone that may have cost, say Rs 19,900 at launch last year, is now priced close to Rs 25,000 or more. Brands have quietly adjusted prices across their portfolios as component costs filter through supply chains.Unlike previous price cycles driven largely by exchange rates or taxation, this one has a more structural character. Memory prices have remained elevated, AI features require more expensive hardware, and manufacturers are increasingly shipping phones with higher RAM and storage configurations as standard.

Premiumisation is no longer limited to flagship devices; even mid-range smartphones now come with hardware that would have been considered high-end only a few years ago.

That is changing how consumers upgrade

For many buyers, particularly in the Rs 20,000-50,000 segment, the difference between paying Rs 32,000 upfront and Rs 2,700 every month is psychologically significant. Financing reduces the immediate burden even if the overall cost remains similar."The smartphone market has remained under pressure in the first half of the year due to rising memory prices, and this trend is expected to intensify further. Against this backdrop, smartphone financing is gaining ground as a primary purchase mechanism," said Tarun Pathak, research director at Counterpoint Research.The financing market itself is also evolving. Counterpoint estimates that nearly 67% of financed smartphone purchases are now backed by NBFCs rather than banks.

That reflects a broader shift in consumer lending, especially in Tier-2 and Tier-3 cities where credit card ownership remains relatively low but smartphone aspirations continue to rise.For lenders, smartphones have become an attractive entry point into consumer finance. For brands, financing has become a sales tool almost as important as camera specifications or processor upgrades.

Financing becomes mainstream

Interestingly, the biggest beneficiary is not Apple.Despite the iPhone's aspirational appeal and its popularity in premium financing schemes, Samsung leads India's financed smartphone market by units sold, followed by Vivo and Apple. Oppo and Xiaomi complete the top five.The rankings reveal something important about India's retail landscape. Financing still happens predominantly offline, where store executives walk buyers through repayment options, instant approvals and exchange bonuses.

Brands with stronger physical retail networks therefore enjoy a natural advantage."Samsung leads the market in terms of smartphone units sold through financing. The company's strategy to use Samsung Finance+ as well as other financing options is working in its favour," said Prachir Singh, senior analyst at Counterpoint.Retail-heavy brands such as Samsung, Vivo and Oppo have also invested heavily in educating dealers and integrating financing directly into the purchase process.

Consumers often leave stores with both a new handset and an approved loan within minutes.

The implications extend beyond sales

Easy financing allows manufacturers to preserve average selling prices instead of cutting prices through discounts. Rather than making smartphones cheaper, brands are making them easier to afford. That distinction matters because it supports profitability even as overall market demand remains subdued.

Prices reshape buying habits

In the medium term, financing is likely to reshape upgrade cycles across the industry.

Consumers may move to newer devices more frequently because monthly instalments lower the barrier to entry. Premium smartphones could become accessible to a much wider audience, further accelerating the industry's shift towards higher-priced devices.At the same time, dependence on financing introduces new challenges. Hidden processing charges, opaque repayment terms and varying interest rates continue to discourage some buyers.

Consumer awareness will become increasingly important as financing becomes embedded in everyday smartphone purchases.There is also a broader question for the industry. If component costs remain elevated and AI hardware continues to make smartphones more expensive, financing may evolve from being a promotional tool into an essential pillar of smartphone retail.That would mark a fundamental change in India's handset market.Not long ago, brands competed on price. Today, they increasingly compete on affordability. Those may sound similar, but they are not. One lowers the cost of the phone. The other changes how consumers experience paying for it. As smartphones become more capable — and more expensive — that difference is becoming the industry's most important sales pitch.