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It's closer to a lease though, no? If you use the [upgrade] option prior to making the final payment, you have to return the phone.

If you make the final payment, and then choose to upgrade, do you get to keep the phone you've been paying for (i.e. an installment loan), or must you return it (aka, a lease)?

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If you pay off the entire amount, you keep the device. If you upgrade before the contract ends, you have the option of paying off the remaining amount and keeping it (or returning it).

It's most likely a terrible idea to return the device instead of paying off and selling it, and AT&T probably makes free money from that, but the rest of the plan is pretty reasonable.

This is what I've always understood to be the case, just never return the device, pay it off and sell it on craigslist/ebay (which I've done 4+ times without any issues).

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