For a long time, my cell phone bill hasn't been a major part of my personal finance decision making. I've had an iPhone 4S for almost 4 years, on the minimum AT&T phone/data plan, with my contract long over. I was paying something like $0.10 per text message, because I texted so rarely that it seemed like a better deal than the $4.99 a month it would have cost me for unlimited messages. So I thought I was doing the right thing, financially speaking.
The problem is that the world of smartphone billing plans has totally changed in the last year or two. Suddenly everyone is acknowledging the true costs behind those contract plans, and there are new options that un-hide the hidden costs that were formerly buried. Because my 2-year contract was long over but I was still paying the same price, I was actually over-paying for my phone.
Several months ago, I dug into the AT&T website and discovered that I was able to easily switch my plan to one where I got more data, and unlimited text messages, and my monthly bill decreased by about $30! I felt very foolish for not having discovered this sooner, but I then continued on my merry way with my little iPhone 4S.
As you might have heard some whispered rumors about, if you talk to an exclusive set of people who are super-in-the-know, Apple just released the iPhone 6S and 6S Plus. (I know, you are totally shocked because you hadn't heard this news ANYWHERE!) I was disappointed when the iPhone 5 and 5S came out, and even more disappointed when the iPhone 6 came out because I don't like their more elongated/larger shapes. I've always liked small phones. But I am finding that small screens are a little harder on my eyes, and my iPhone 4S is starting to feel quite sluggish and losing its battery life, so I decided that the release of the 6S was my time to buy a new phone.
At first, I still had financial virtue as my main goal, and I figured I would just buy an iPhone 6 after its price dropped. But the more I thought about the 6S, the more I leaned towards getting the most current model, for some of its new features. But I'm really not sure how I'll cope with that larger size. There have been some rumors saying that the iPhone 7 release in 2016 might go back to offering a smaller size, so I decided to look at ways of buying a new phone that would allow me to upgrade a year from now. It's not a smart financial choice to buy a new expensive phone every year, but I use my phone a lot, so there is value in having one I enjoy using.
I'm happy with AT&T, so I looked at their plans first. The AT&T Next plans allow you to spread the cost of the phone over different time periods, with trade-in and upgrade allowed partway through. If I wanted a new phone in a year, I'd choose the AT&T Next 20 plan. What surprised me is that all of AT&T's Next plans work out to be cheaper than signing up for a 2 year contract-- not because of the phone pricing itself, but because they give you a "discount" on your phone service if you're on the Next plan-- aka they charge you more for phone service if you are on a contract. It's weird-- I would think they would want to lock people in and get that $300 upfront payment for the device instead of spreading it all out.
Then I looked at Apple's newly announced Upgrade Program-- it's actually a hair cheaper than AT&T's comparable plan, you get to trade in for a new phone after a year, and they throw in Apple Care so you have some extra coverage if you damage your phone. I take good care of my phone and have never had a cracked or broken screen, but I did worry a bit that I might be fumbling with the larger 6S size, so perhaps there would be more value than usual to an insurance plan. BUT... it actually doesn't save you that much money on a cracked screen. You still have to pay $99-- without Apple Care it's $149.
I also started thinking about how all these new variations of phone purchase plans serve another psychological purpose-- they just want you to get used to the idea that paying $750 for an iPhone is normal and necessary, and that you WILL pay that much, one way or another. That is almost as much as Apple's entry-level laptop computers cost! Back when I bought my first cellphone around 1999-2000, I would never have dreamed of paying the full $600 or $700 my (admittedly high-end) phone would have cost. When that phone was stolen, I bought another unlocked used one on eBay rather than cough up for a new one while I was still under contract. Back then, there was no option to pay less in service charges of course... and the idea of an additional data plan was nowhere on my radar either. It's just a different world now, and we are all so used to doing so much with our phones, it's become a whole different calculation of cost vs. value.
So I looked into paying full price for an unlocked iPhone, and sure enough, it works out to be the cheapest option. Obviously, I am very lucky to be in the position to be able to afford to pay the full cost up front without having to spread it out or pay interest on a credit card balance-- that's not an option for everyone. Here's why it works-- all the other upgrade plans are based on you trading in your old phone, which has value. If you get to keep your old phone, and can pass it on to another family member or friend, or sell it, it significantly changes the net cost of ownership. The remaining cost of the phone that AT&T absorbs after you trade it in is most likely a lot less than you'd get if you sold it, and far less that your friend or family member would pay for a new phone.
I made a spreadsheet for myself to figure all this out:
And after seeing the numbers on my spreadsheet, I ran down to the Apple store! I am now the mostly happy owner of a shiny new iPhone 6S, paid for in full. It's a pleasure to use and I do like the larger screen, but it still feels awkwardly large and slippery and one-handed use is nowhere near as easy as with a smaller phone. We'll see if I want to keep it or move on to whatever the next thing is a year from now!
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