“Deciphering upgrade programs and figuring out what’s the most economical way to get the new iPhone 6 or the iPhone 6 Plus given all the changes in wireless service plans in the past several months is tricky to say the least,” Marguerite Reardon reports for CNET.
“In this edition of Ask Maggie, I help one reader figure out if he should go back to a two-year contract when getting a new iPhone 6 or if he should buy it full price,” Reardon reports. “I also help another reader who wants to keep his unlimited data plan on AT&T figure out his options for buying the new iPhone 6 Plus.”
Read more in the full article here.
The author notes that buying an iPhone outright is identical to buying it “on installment” through the carrier’s contract program. The monthly contract fee includes a charge for the installment purchase plus a fee for services provided — although these are bundled, not broken out.)
This author’s assertion is true — assuming the buyer would anyway purchase the service plan that the carrier has bundled into the contract. However, IF someone was happy buying less services (for less money) elsewhere, then the consumer would save the difference between whatever the carrier would charge you for services in their contract plan, and the cheaper services you could find elsewhere. (Includes pay-as-you-go programs or other discounted services through MVNOs.)
In addition, if you travel where an GSM phone (ie, ATT phone system) can be used (which is pretty much the rest of the world), then buying your own phone outright (and buying services separately) may allow you to keep the phone unlocked so you could buy local SIM cards in Europe or Asia when you travel, thereby taking advantage of low local mobile rates in those local countries.
Just saying. I think a lot of people end up paying carriers for more services than they really need. So it is worth a more detailed explanation than the author provided in this article. Folks, buy just the services you need. And put the money in the bank …or give it to a good cause.
I heard (I hope I’m right) that the extra money you pay for your subsidized phone (at least in California) is taxed at a much higher rate than if you bought the phone outright.
Correct. Contract monthly plans that bundle mobile services and phone instalment plan into a single bill are taxed as wireless services (where the tax rate is close to, and in some states above, 20%).
When you go for a plan that does NOT contain a subsidy (and some carriers do offer this), and buy the phone on an interest-free two-year loan, your phone is taxed as a, well, phone, so it is retail (single-digits, in some states as low as 3%). For the base model iPhone, this is almost $100 difference you’re needlessly donating to the government (i.e. neither the carrier, nor you, nor Apple, are getting the money).
You can always soften the impact of a new phone purchase by not buying it.
If there’s no expected impact then just buy it. I don’t understand why it gets any more complicated than this.
I could never afford to buy the phone outright. The cheapest iPhone in Canada is $750. The only possible way I could do so would be to save up for two years at a time and buy a new iPhone every two years (or contract cycle). The iPhone is more expensive than an iPad.
Plenty of good points made. I’m going to tie Tom’s point into your post Big Mac.
Tom is saying carriers typically lock you into an $80 minimum plan over 2 years, when a lot of users only need a $50 plan. That’s $720 savings over 2 years. Enough to buy the iPhone outright and not have to lock into any one carrier, or any one plan.
Unless you really need an $80 plan, perhaps you can afford to purchase the phone outright.
If your budget truly is tight, perhaps purchasing a pre-owned iPhone 5S with AppleCare+ remaining on it is a great way to go. Stay a generation behind and save a bundle.
Perhaps. Right now I have a 4S and I’d like to go for the 6. Seeing the hands on reviews it looks really good. I like the bigger screen. The 5/5S is not all that much bigger than the 4/4S. Just a bit taller. But I think I’m gonna wait until the 6 is in stores so I can have some hands on time with it myself before deciding. My plan with Fido (Canada) is around $78/month with taxes. The thing for me is that I’m still one year away from the end of my 3 year contract. Thankfully those are gone. For me to upgrade now I’d have to “buy out” the remainder of my contract and renew for 2 years. Otherwise I’d have to pay full price for the phone. Or stick it out with the 4S for another year and get the “6S” next year.
As enticing as Apple makes the new products, logically you should stick with your 4S for another year and try to save to purchase a phone in 1 more year (or save your cash). 2 years ago people were selling kidneys and children to get a 4S.
Carriers have also got wise to the fact that people want a new phone sooner than 3 years. Before Canadian carriers locked you into a 3 year contract @ ~$60/mo = $1440. Now they are doing the same thing but on a 2 year contract @ ~$80 = $1920. They are getting more $ out of you in much less time.
It’s pretty disgusting if you ask me, but nobody is forcing you to sign.
Well actually my plan before was around $100/month. But I was able to get it down to around $78/month and not lose any of my features.
Even in Canada, there is bound to be a way you could buy that iPhone 6 on an interest-free loan, with some modest downpayment. Many major American retailers (including Apple) have their own store credit cards, on which they offer 6, 12, 18 and even 24-month no-interest, no-downpayment purchase deals. You buy your device, and you have two years to pay it off at no interest. You need to pay the monthly minimum (around $10 on a $550 balance), and make sure you pay off the whole balance on the last due date for the last statement cycle of the offer. That must be much more manageable, but it assumes that you can get a plan that does NOT include a subsidy part (yours sounds like it does).
Paying a monthly min of $10 on a $550, 0% interest credit card offer, would result in getting hit with all of the accrued interest at the end of the 0% promotion period … even under the longest promotion period of 24 months.
$550, 0% interest would mean payments of –
$22.91 for 24 months
$30.56 for 18 months
$45.83 for 12 months
$91.67 for 6 months
In order to pay it off before the accrued interest penalty hits.
I’ve been crunching numbers on these scenarios all weekend, trying to figure out what the best strategy is for me. I have considered buying the iP6+ 64Gb outright, then using Cricket for service (@ $35/month – a savings of $60/month over current plan). The savings ($720/yr), doesn’t equal the cost of the iPhone 6+ ($849) though. For the first year it would make more sense, as I would have to pay $400 for the device under contract, so the first year savings makes up for the difference ($449). But subsequent years after that, it doesn’t add up.
As I have other iPhones on my account (daughter’s & work), I always have an upgrade available every year to use on the newest iPhone. So the option to move everything to Cricket, would be very expensive, as it would mean breaking several contracts in order to do it all at once – somewhere in the $1300 range. Otherwise, I could move one line at a time as the contracts come up, but I would then have a $35/month Cricket bill, as well as an ATT bill for the remaining lines, so there really is only a $5/month savings in that scenario (ATT $40/extra line, Cricket $35 for 1st line). Eventually the savings would escalate, as Cricket offers a great deal of $100 for 4 lines with a free 5th line if you need it. But it would be at least 2 years, and 2 new iPhones (6++, 7+ … ???) before I could get to that point.
It kills me to pay a big TeleCo all this money every month, but right now, I don’t see a scenario where it makes sense to move someplace else.
It depends on your plan.
I have ATT, and my family plan goes back to Cingular, and back before 2000. I have unlimited data. So I am paying for the subsidy reguarsless of what I get. If I change anything, I will end up paying more.
I plan on doing the Verizon Edge thing. They knock $25 off the monthly bill and I think that should reduce the tax a tad. Than I’ll have to pay the full price divided up over 20 months. So I’m figuring my bill will go up about $15 a month, if I get the Plus with 64 gigs. Ot will be $42.50
It’s simple math really.
With most contract plans, you pay a cheaper price for the phone, sure, but they like to charge you more and you’re also contractually obligated to pay that price for the next two years.
I just looked up AT&T’s cheapest plan. The cheapest plan they have, with the device charge included is $80 a month. They’re charging $40 a month for the device. 40 x 24 = 960. Just for the phone.
A 64 GB iPhone 6 will cost you $749. About $200 less. And the plan service charge is near what most prepaid plans offer. So according to the numbers I’ve pulled up, you stand to save $200 a year by going pre paid.
Also, the 64 GB iPhone 6+ retails for $849. You’re still saving a decent amount of money.
One thing I rarely see mentioned though..
Discounts.
Every carrier has them.. They have a book full of them. Member of AARP? discount on service. (I think it’s 15-20% service discount)
My work I get a 25% service discount per month, and 50%!!! on accessories. $100 bluetooth etc? why sure i’ll buy it for $50 😉
So that $100 monthly bill can be 15-25% less easily if you take the time to look into the available discounts for service.
is it possible to buy 2 iphone 6 simultaneously with the same or diff contract company ??