Buzz
A few weeks ago, back in the Before Times, I received an email from a reader inquiring if it would be worth using their tax refund to buy a mobile phone.
"My wife and I are on the same phone plan, and our iPhone 7s are starting to feel outdated," the reader shared. "We've had them for over three years, and we're not the type to upgrade just for the sake of it." The reader mentioned that purchasing two new phones wouldn't be financially difficult for them, and they generally hold on to their phones for about three years. "Is it more sensible to buy outright or should we opt for a monthly installment?"
This question was such a refreshing break from the Now Times that I couldn't help but reflect on the reader's situation. To top it off, my own phone malfunctioned a few weeks ago, forcing me to create an elaborate workaround to make calls and send texts until my replacement arrived in the pandemic aftermath.
But enough about my own issues. The reader's dilemma isn't about which phone to choose—we have a whole section dedicated to that—but rather which payment method is the most efficient.
There are essentially three ways to acquire a mobile phone:
You can lease a phone through your carrier, with the cost added to your monthly bill or included in your contract elsewhere.
You can finance the phone, paying for it in separate installments apart from your phone bill.
Or you can buy the phone outright.
Andrew Moore-Crispin, head of content and branding at MVNO carrier Ting, strongly advocates for buying outright.
One reason for this is that you no longer need to replace your phone every 24 months.
"The gap between what a thousand-dollar phone offers and what a $300 phone can do has significantly shrunk," Moore-Crispin noted. "In the past, a $300 phone couldn’t hold a candle to the top-tier models, but there’s been a lot of standardization across the industry."
The previous rationale behind leasing a phone from your carrier was the promise of a consistent upgrade cycle and a predictable monthly payment.
"The advantage of leasing is knowing exactly what you’ll pay each month," Moore-Crispin explained. The downside? "You never stop paying." However, if having the newest and best phone is essential and you can't afford to buy it outright, a lease might be worth considering.
But if you're considering leasing because you still feel the need to upgrade every two years, it’s time to reconsider. "The two-year upgrade cycle is over for most people," Moore-Crispin said. "Most people now hold on to their phones for longer than two years."
A survey by Ting revealed that 30% of cell phone users keep their phone for two years, 47% keep theirs for 3-5 years, and 8% hold on to theirs for five years or more.
Only 38% of respondents bought their phone directly from their carrier.
A separate report from market research firm NPD Connected Intelligence in 2018 found that the average user upgrades their phone approximately every 32 months.
In addition to the artificial upgrade cycle, many users have moved away from contracts, Moore-Crispin explained. A free phone once served as a big incentive to commit to a multi-year contract, but consumers are now aware that the cost is hidden in their monthly bill.
If you’re looking to cut back on your budget, a great place to start is your mobile plan, which may be contributing significant costs toward the phone you're currently using. Whether you opt for a prepaid plan or negotiate a better rate for your post-paid plan, you could potentially save a lot by separating the phone cost from your call, text, and data expenses.
If you choose to finance a phone to make the purchase more manageable, Moore-Crispin advises ensuring that you fully understand the terms of your agreement. Many phone retailers offer installment plans, but it’s important to ensure you can meet the obligations set forth in the contract.
If you're able to buy a phone outright, ensure it's unlocked, Moore-Crispin advised. A locked phone, which only works with a specific network, eliminates the flexibility to switch between carriers, which may be the very advantage you're seeking.
