Is it better to have a 2-year contract with a reduced-price smart phone, than to out-right buy the phone and have no contract?

Question about

Add tags:

korbendalis August 24, 2011

Is it better to have a 2-year contract with a reduced-price smart phone, than to out-right buy the phone and have no contract?

If so, Why?

answer this question

top answers

korbendalis' pick

NotHotWater 1 year ago

It's an interesting dichotomy. If it's going to be your FIRST phone ever with a carrier, it's probably best to go for the two year contract. That generally means you got a good phone at probably a good price. After the first year, you're generally eligible for another reduced price phone as long as you sign another contract. Unless you are DEFINITELY sure of what phone you're going to get next and that it's going to be on your carrier (for example, I KNOW that I want the iPhone 5 next and that it will be offered on AT&T) you should buy your second phone from your carrier without a contract.

Here's my situation. I had the iPhone 3G, the iPhone 3GS came out. I could have purchased it at a reduced rate, but I wanted the phone AFTER it, so I decided not to purchase a phone so I would be fully upgrade eligible by the time the iPhone 4 came around.

Essentially it comes to this: if the phone you want will last you a full two years (or at LEAST a year) before the next one you want comes out, then it's worth it to sign a contract. If you're just getting an interim phone while you wait for the phone you really want, it's not worth it.

So, pros of contract: reduced price, guaranteed upgrade price on same carrier.
Pros of unlocked: not tied to a carrier, can switch carriers at any time, can sell your phone more easily (as its an unlocked version).

What I did recently, during a slump when I was really bored with my iPhone 4, was buy a Samsung Galaxy S II out of contract - if I had actually liked it, I could have stuck with it until the iPhone 5 rolled around and bought that on contract at a reduced rate. But, because I bought the SGS2 out of contract, I didn't have to re-commit to another two years and I could with the phone whatever I wanted.

I know it's really convoluted, hope this helps.

mark as good answer

4 people like this answer

| 3 replies

korbendalis 2011-08-24 20:00:35

You appear to know how to play the game within the bounds of the board that the carriers have created, very well. I have not been able to do that and it seriously bothers me about the limitations that have been artificially generated to suit the greed (imo) of the carriers.

I have had 5 android devices since the advent of Android on T-mobile (and am still with T-mobile). I wish for a future where phones are ubiquitous to the carrier, where being out of contract with a carrier actually means that I can go to another and immediately start service.

I asked this question to the GDGT community not having no knowledge of the issue, but having researched it quite thoroughly. I have a Google Docs spreadsheet set to Public on the web (https://spreadsheets.google.com/spreadsheet/ccc?ke...) that shows the comparisons of On-Contract to Off-contract cost of phone and plan for 2 years, across every carrier that is available to me (for roughly the same smart phone and service; Unlimited).

Thankfully at least one company (Google) has stepped up to the challenge of the current phone market to attempt to force the issue of more freedom of choice in phone, OS, and applications. If only were more choice in carrier...

NotHotWater 2011-08-24 20:05:32

Totally agree, great sheet!

nitehawk 2011-08-25 12:14:20

Wow that sheet is nice! It's often lost in the noise just how much the ETF is and is truly a big reason people don't break contract. If anything as consumers we should be pursuing a reduction in the ETF because if you lose your job, get into legal trouble, get sick, etc and need to drastically reduce your bills, you can't as long as that ETF is so damn high.

However I am going to advocate going on a family plan. Share your minutes, share unlimited texts and group it together with 5 people if at all possible. I wouldn't suggest it with roommates, but with parents, grandparents, etc because even if you don't live together, family is less likely to freak out over little things like an extra $30 payment because someone went over the minutes or data or whatever. You can also manage it online, so the address isn't as important as it used to be. And if someone breaks their phone and needs to use someone else's upgrade, your mom/grandma probably doesn't care.

sort by

votes
date

2 more answers

keppy 2011-08-25 10:20:16

Philosophically, I think we should all stop buying subsidized phones, but I understand that economically, if you want the latest and greatest it is usually a better deal to go the subsidized route.

The huge problem I have with it is that if you supply your own phone, you still have to pay the same monthly price. This is completely bogus, but will unfortunately remain the norm unless a significant portion of customers start supplying their own phones and hopping carriers frequently.

If you can afford it, or if you can settle for a year old phone (since they are generally pretty cheap on ebay), buy off-contract and help fight the battle! :)

mark as good answer

0 people like this answer

| 1 reply

nitehawk 2011-08-25 12:01:30

Fight the battle? Are you kidding? I am willing to bet that less than 10% of smartphones are bought off of contract. It's just too easy to go into a store and buy a phone while getting tethered to a contract. No I don't like signing multi-year agreements, but it's going to be this way for a while. The phones themselves are worth more than the $500 that you can buy them off of ebay and like you said, buying the phone without a contract often doesn't get you a reduced monthly payment. So the incentive is very small to not be in a 2 year agreement.

Phones don't last long, chances are that if you bought a phone the day it came out 3 months later another new phone would have an added feature that your brand new phone doesn't have. So waiting for a phone to drop in price so you can buy it online at a decent deal (less than $400) just doesn't work if you want the latest and greatest.

Philosophical reasons are nice, but carriers are the ones supplying the data, so fighting them is much worse than fighting a cable company. You simply can't use your phone without a carrier, maybe you don't need one of the big ones, but you can't make a hat to be a antenna like you can attach an antenna to your house to skip the cable company.

My advice: use a family plan, at least then you're not paying $100/month just to use one smartphone with data. You can easily have 3-5 phones on one family plan and have a bill less than $300, plus sharing unlimited text and more minutes.

Maybe mobile wifi will become more economical and is already better for people who have multiple mobile devices like netbooks, tablets, etc. but those have bandwidth caps and aren't cheap either.

Geekster 2011-10-09 03:40:22

In terms of a US UK comparison it would seem to be 'swings and roundabouts' but better for us in the UK overall by the looks of it.

The price over a 2 year contract always costs more than unsubsidised but people have a difficult time paying such a high price upfront.

Unlocked, unsubsidised phones are readily available and generally cost more than they do in the US but the pressure on network providers to keep customers means you can negotiate an excellent monthly price, which is not necessarily on contract, or at least not long term.

For example my Galaxy S2 cost £399 ($620) and that was on an offer when it had just been released and the standard price was at least £499 ($776) everywhere else.

The price I negotiated was a choice between £15 pm ($23) for 2000 any network minutes, 3000 same network minutes, 5000 texts and truly unlimited data (tethering included), or, a 12 month extension contract for £5 pm ($7.77) offering a more reasonable 500 minutes any network calls, 3000 same network calls, 500 texts and 2GB data.

The savings always come down to how often you decide to upgrade your phone, either on or off contract so.

Obviously you guys have more issues with coverage considering the differing carriers frequencies so may be I don't feel so bad about being charged $30 more for the new kindle!

mark as good answer

0 people like this answer

| add reply