How to get a new iPhone every year

December 11, 2013 at 2:21 pm 3 comments

I don’t understand why there is so much confusion in terms of phones and subsidies.  Basic math reveals how to get new iPhone every year for minimal cost and without being locked into a contract.

The key is to buy the iPhone and not rely on a subsidy.  Let’s take a look at the cost comparison.

First there is the cost of the phone.  Let’s use the iPhone 5S (16GB) as an example.

  • iPhone 5S from Apple: $650
  • Subsidized iPhone from AT&T: $200

Second, there is the cost of service.  For purposes of comparison, let’s select common features: unlimited talk, unlimited text, and 2.0 to 2.5GB of data per month.

  • No-contract plan (TMobile with 2.5GB data): $60/mo or $720/yr or $1440/2yrs
  • 2 year contract (AT&T mobile/share plan with 2.0 GB data): $95/mo or $1140/yr or $2280/2yrs

Let’s examine the total costs over one year with each option:

  • No contract plan: $650 (phone) + $720 (service) = $1370
  • 2 year contract: $200 (phone) + $1140 (service) = $1340

And the total costs over 2 years are:

  • No contract plan: $650 (phone) + $1440 (service) = $2090
  • 2 year contract: $200 (phone) + $2280 (service) = $2480

These numbers reveal that the break even point for buying a phone is roughly a year.  During the second year one pays the phone company about $400/yr or $35/mo for the convenience of subsidizing the phone.

There are numerous non-financial advantages with purchasing the phone and going no-contract.

  • One can switch carriers on a whim.  If service is poor in your area you can easily switch.
  • If you leave the country for a while, you can terminate service while you are gone.
  •  One can upgrade their phone every year. If you are a gadget hound, you may find this appealing.
  • Some smartphones retain value. This can be a significant financial advantage when selling your old phone.  You can apply your proceeds from your old phone to a new phone.

Note that there other factors to consider.  Some of the data sharing plans can offer pricing advantages if you have multiple devices.  Shop around to compare these plans.  Also, the numbers will differ based one the number of phones and plans one purchases – with family plans, for example.

The T-Mobile plans typically include tethering, which is a nice feature.  If tethering is important to you then take that into account when comparing plans.

I recently switched from AT&T to T-Mobile after purchasing an iPhone.  I found the process of not having to read over a lengthy contract to be refreshing.

 

UPDATE: 

Here are the current (12/11/2013) rates AT&T prepaid plans.

attplans

 

Here are the current (12/11/2013) rates for Verizon prepaid plans.

verizonplans

Here are current (12/11/2013) rates for Sprint prepaid plans.

sprintplans

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Entry filed under: Consumer, Technology. Tags: , .

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3 Comments Add your own

  • 1. Bormasina  |  December 11, 2013 at 7:07 pm

    Good for you that you can save with T-Mobile. T-Mobile is not working for me and will never going to work unless they add more coverage. You also state “One can switch carriers on a whim”. So, where should people go if they can’t rely on T-Mobile’s network? Straight Talk? No way … Switch carriers on whim, right …

    Reply
  • 2. Mike  |  December 11, 2013 at 7:18 pm

    I used T-Mobile as an example. AT&T, Verizon, and Sprint offer similar plans – usually pre-paid plans. AT&T calls their plan the Go-Phone plan.

    I just checked on AT&T and Verizon. They now offer plans similar to T-Mobile: 2GB data/month with unlimited talk and text for $60. Last time I checked, which was a few months ago, the pricing was higher. So they seem to be competing with T-Mobile.

    I actually went with the T-Mobile $70/mo plan. It offers unlimited data with 2.5GB tethering per month.

    Reply
  • 3. Bormasina  |  December 12, 2013 at 2:57 pm

    Like i’ve said, good that you are happy with your choice. I believe that carriers have some system in place that is prioritizing customers based on their type of contract. I understand that this statement is mere speculation because i can’t prove it, but the price delta got to be supported in some way. There are bunch of threads online that discuss this, but as i’ve said, there is no proof.

    http://www.howardforums.com/showthread.php/1817863-Pre-paid-users-low-network-priority
    http://www.howardforums.com/showthread.php/1683640-Call-Priority-Prepaid-vs-Contract-Customers

    I’ve used the AT&T’s prepaid service before, and one thing is for sure, if you you are prepaid customer, they treat you worst than sh**. Also, while on prepaid with AT&T the coverage seemed very spotty compared to the same device that was on postpaid. I’m electrical engineer and i can’t flat out state that they do it based on my little experiment. There are a lot of variables and one needs a controlled environment to prove that the online rumblings are not just rumblings …

    Reply

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