Sounds like you're not from the US.
Most people get their phones from their service provider. And the major providers offer a free phone upgrade every 2 or 3 years if you trade in your old one. It's structured as paying for the phone in monthly installments, and they give you a credit each month to cover the installment. They give you the option of paying upfront for the phone, but you don't get the credits that way, so it's almost always a terrible idea to do.
They are very, very clear about what the full price of the phone is. The catch in all of this is if you cancel your service before the term is up, you lose the remaining credits and have to pay the remaining balance.
The result of this is upgrading more frequently than the 2 or 3 year cycle is very expensive. You can keep your phone longer than the cycle if you really want to, but it rarely makes sense to because there usually isn't any benefit to turning down the upgrade offer.