Opinion of buying cell phones with 2-year contracts

[I spent the winter writing songs about getting better]

Only dumbs who can't do math do this anymore.

I can either pay $40/month plus data for a phone under contract or $15 a month with no contract. Duh. The contract price is not worth it. Don't ever do this again, seriously. Just pay the full price like you would with a computer or TV instead of expecting your cable or Internet provider to subsidize you while you sign away your soul for two years.

[Adam Griffin]

I've grown against it, but I also refuse to buy a new cell phone until I absolutely need one, so I may get sucked in again. As I've gotten older, I play less with apps and whatnot...I have an iPhone 4 that I got under a 2-year contract in February 2011. Though it does suck at times: I can't even play Ingress because upgrading to iOS 7 (required for the app, and a lot of others tbh) will make this old phone so sluggish that it'd be pointless to even own it!

[I spent the winter writing songs about getting better]

I've grown against it, but I also refuse to buy a new cell phone until I absolutely need one, so I may get sucked in again. As I've gotten older, I play less with apps and whatnot...I have an iPhone 4 that I got under a 2-year contract in February 2011. Though it does suck at times: I can't even play Ingress because upgrading to iOS 7 (required for the app, and a lot of others tbh) will make this old phone so sluggish that it'd be pointless to even own it!

If you need to get a new phone, don't get it under contract. Signing a contract is effectively taking out a large interest loan with a big down payment.

For example if I wanted an iPhone 6...well I never would. But to get one under contract with my carrier would cost $199 plus a $40 upgrade fee for the cheapest one. And then $40/month after that before data. Out of contract phones cost $15/month, and the full price of the cheapest iPhone 6 is $649. So I'm effectively spending an extra $25/month after that.

$25 x 24 months = $600
$600 + $199 + $40 = $839

So that's effectively paying $190 in interest on a $410 loan over two years...that's over a 23% interest rate! Oh and no way to do an early payoff or buyout either.

And the best part is, all the major carriers offer actual no interest/no down payment loan plans now instead. And if you buy the phone under contract instead of that, you effectively are taking out a loan, and you're going to pay a lot more.

[HagridOfTheDeep]

I know you're *right,* but I think it sort of misses the point. It's like if you cost out geothermal power at your home vs. the status quo. Of course the geothermal option will pay off down the line, but it requires that you have a large sum available up front. It's an extreme comparison, but I'm not sitting on a pile of $800 for a new iPhone. I may be sitting on $400 though, and the slightly more expensive monthly bill to finance the rest of the cost of the device could be more manageable than buying the whole phone outright and paying slightly less month to month.

[Murica!]

I know you're *right,* but I think it sort of misses the point. It's like if you cost out geothermal power at your home vs. the status quo. Of course the geothermal option will pay off down the line, but it requires that you have a large sum available up front. It's an extreme comparison, but I'm not sitting on a pile of $800 for a new phone. I may be sitting on $400 though, and the slightly more expensive monthly bill to finance the rest of the cost of the device could be more manageable than buying the whole phone outright and paying slightly less month to month.

^^^^

[I spent the winter writing songs about getting better]

I know you're *right,* but I think it sort of misses the point. It's like if you cost out geothermal power at your home vs. the status quo. Of course the geothermal option will pay off down the line, but it requires that you have a large sum available up front. It's an extreme comparison, but I'm not sitting on a pile of $800 for a new iPhone. I may be sitting on $400 though, and the slightly more expensive monthly bill to finance the rest of the cost of the device could be more manageable than buying the whole phone outright and paying slightly less month to month.

I don't know about in Canada, but in the US all major carriers actually offer no-interest loan plans.

So let's go back with that iPhone 6 example. You can get that phone with no down payment for $27.08/month. That plus $15 equals $42.08/month...vs. $40 with that huge down payment. Plus if you make an optional down payment of $240, that cuts $10/month off the cost, so for the same up front cost you can then pay just $15+17.08 per month, basically just over $32 vs. $40. There's no reason to buy it under contract.

Hell even better example, before I did an early buyout, my Samsung Galaxy S4 was $24.99/month + $15. Now under contract it would've been $40/month plus a $139 upfront cost and upgrade fee. Now which makes more sense? Duh.

But even aside from that, you could just use a credit card for all or most of the cost, and still pay far less in interest than you're effectively paying under a contract. Plus with a credit card you can always do an early payoff if you get a windfall, under a contract you're stuck for two years, no way out aside an even more expensive ETF.

edited out: anti-iPhone stuff that had little to do with the actual topic.

[Tender Branson]

I think in Austria, it makes no difference if you buy let's say an iPhone 6 right away on Amazon and then take a SIM-only contract, which you can cancel every month - or buy the phone via a 2-year contract.

You'll end up with roughly the same price if you use the same, comparable plans with the 2-year or the SIM-only contracts.

With the operator "3", you are actually better off if you take the 2-year plan (unless you are happy with the more limited SIM-only plans):

2-year

Hallo XXL plan (50€ per month), unlimited everything (minutes, messages, internet)
iPhone 6 - 16GB: for free
Activation fee: 69€
Effective cost for 2 years: 1269€

Hallo Pur XL plan (30€ per month), (2000 minutes, 1000 messages, unlimited internet)
iPhone 6 - 16GB: 449€
Activation fee: 69€
Effective cost for 2 years: 1238€

https://www.drei.at/portal/de/privat/handys-und-geraete/alle-geraete/geraetedetails/iphone-6.html

...

SIM-only

Hallo SIM Premium: (40€ per month), unlimited everything (minutes, messages, internet)
Activation fee: none
iPhone 6 - 16GB: ca. 580€ via Amazon
Effective cost for 2 years: 1540€

Hallo SIM XXL: (24€ per month), (3000 minutes, 1500 messages, unlimited internet)
Activation fee: none
iPhone 6 - 16GB: ca. 580€ via Amazon
Effective cost for 2 years: 1160€

https://www.drei.at/portal/de/privat/tarife/handytarife/hallosim