A long time ago, we would get free cell phones whenever we opened up a new line of service. We’d have a year-long contract, a pool of voice minutes to use, and be sent on our way. But has the age of the cell phone contract come to an end?
First, realize that when you buy a cell phone with a new contract you’re not paying full price. Rather, you’re paying a less (subsidized) price for the phone because the provider wants the payment stream for the two-year contract period.
An unsubsidized cell phone is a phone you pay for out of pocket without any contract discounts. Owning your phone outright means that the upgrade discounts we have become accustomed to will disappear.
Unlimited Data, A Thing of The Past
Verizon’s switch to data share plans and unsubsidized phones is the most widely publicized; however, it is becoming the norm for major carriers, including AT & T and T-Mobile, to do away with unlimited data. Sprint remains the only carrier still offering unlimited data. This trend marks the beginning of fewer options for phones that are subsidized with the purchase of a two-year contract.
How Much Do Unsubsidized Phones Cost?
Dwight Silverman broke down the cost on unsubsidized phones in March 2012. For example, if you want to purchase the Samsung Galaxy S III, unlocked and unsubsidized, it will cost you $699.99 on Verizon. With a two-year contract, it’s going to come out to about $250.
That’s a savings of $450 if you opt for the two-year contract, or $18.75 per month for the life of the obligation. Sounds like a lot of money, and it is.
But wait, there’s more. If you like to change phones to the latest device, plan on moving to another place (where your provider may not have terrific coverage) or expect new technology to make your device a dinosaur, you need to think about one more thing – the dreaded cancellation fee.
Those cancellation fees comes to a whopping $350 on Verizon. Leave the fold early and you’re looking at one whopper of a bill.
Why Spend the Money on an Unsubsidized Phone?
The amount you choose to spend on a phone is up to you. Not only can you buy new or used but you will also be free of long-term contracts:
- Upgrades are on your timeline. You can sell your phone for its fair market value and upgrade when you choose.
- Data sharing packages. At least from Verizon, you will be able to add all of your devices including tablets and netbooks.
- No Contracts. You are not on a contract and can choose a month-to-month plan that meets your needs and budget.
- Keep Your Existing Plan. If you’re on an existing unlimited data plan, swapping out your phone without a new contract will allow you to keep the same deal. if you’re a big data user, that’s a major benefit to you.
The Drawbacks of Unsubsidized Phones
Sticker shock sits at the top of the list of reasons why not to buy an unsubsidized phone. That is not the only reason to avoid unsubsidized phones:
- Insurance. Choosing a carrier who offers phone subsidies means you should be able to purchase an insurance plan that covers loss or damage.
- Data overage charges. If you go over your allotted data share plan amount, you will pay for it.
- Easy upgrades. You can upgrade on average every 18 months when you are under contract with a carrier. Phone subsidies allow you upgrade with less cash out of pocket.
Up front costs equal a higher price to buy unsubsidized phones. Depending on the device, plans and the risk of data overages, you may be in for a big bill with an unsubsidized phone. If you are paying a large deposit at the beginning of a new contract and the subsidized cost of the phone, unsubsidized may save you cash in the long run. If large amounts of data are important or necessary for your job or lifestyle you may opt for subsidized phones and a long-term contract.
Balance Your Interests – Not the Wireless Provider’s Needs
Money’s tight, but shelling out a few extra bucks for a new phone may enable you to keep your existing plan without being bound by a long-term contract. Looking at your needs and interests rather than taking your provider at face value may save you money and headache in the future.