Can You Afford a New Smart Phone?

September 2, 2015 | 1 Comment

by David Flament

Tags: installment plans, iPhone, iPhones, Smart Phone, Smart Phones, Subsidies for smart phones, Subsidized phones

For most of us, the cost of getting a new smart phone is too expensive. A new iPhone costs anywhere from $649 to $949. I have always depended on getting my phone every two years with a subsidy from my cell phone company when I sign a new two-year contract. The subsidy brings the price down to $200 to $500 on that new iPhone. Those subsidies are why cell phone companies say our bill is so high.

 

The Changing Landscape

Now, things are changing in the cell phone market. Cell phone companies are doing away with subsidies.

• T-Mobile was the first to do this in March 2013.
• AT&T no longer offers two-year contracts for phones purchased from third parties such as Apple or Best Buy, as of June 1, 2015 . At this time, AT&T is still offering subsidies with a two-year contract only through their company website.
• Sprint still offers a two-year contract, although their newest plan, iPhone Forever, is a $22-per-month lease.
• Verizon has totally ended subsidies as of August 13, 2015. This change goes against what Verizon had gone on record as saying just last year when CFO Fran Shammo told investors, “we believe that the subsidy model is an extremely good model. It has done wonders for us in this industry. So I think to abandon that is a mistake.”

 

The New Trends

The new trend is installment plans with all four major carriers offering different versions of these plans. This allows someone to purchase a new phone with as little as $0 down and make payments which are added to their monthly phone bill. T-Mobile and Verizon plans are slightly lower without the subsidies. However, a recent Wall Street Journal article pointed out it will end up costing consumers more to get a phone on an installment plan. The worst part of installment plans may be that the monthly phone bill probably will not be going down enough to cover the cost of those installment payments and you may end up paying an even higher bill each month.

 

Which Way is Right for You?

It depends on your needs.

• Subsidies allow a much smaller one time payment with no additional charges on your monthly bill, but you are tied up for 2 years with that carrier.
• Installment plans offer a new phone with no money down and no contract, but a higher bill. With installment plans we can more easily shop for a better deal with another carrier, but would have to pay off the balance on our cell phone before switching to another provider.

Installment plans may also create more competition and finally bring down the monthly cost of having a cell phone with internet access. Without subsidies, we may need to get a little more life out of our current phone before getting that upgrade. Whether the competition brings costs down or not, we will need to be savvier about choosing a cell phone carrier, so do your research before you buy!

 

Don’t Forget the Value of Your Old Phone

Finally, do not forget you can sell your old smart phone and make some money. This can help offset some of the cost of purchasing a new phone should you choose a subsidy. One easy place to sell your old smart phone is at gazelle.com. They make it easy — just follow a couple of links and you are done. Gazelle will send you a box for your phone to send back with the postage paid. You will either receive a check, or even quicker, you can get an Amazon credit.

David is the Manager of Adaptive Technology at Second Sense and an avid iPhone user.