Buying a smartphone has changed a lot in the past few years. It used to be you would sign up for a two-year contract, make a $1 to $300 one-time payment and you wouldn't have to think about it again for two years.
However, now that carriers have largely phased out their contract plans, you have more buying options. You can buy a phone outright, sign up for a carrier payment plan or choose a leasing-style plan. Which one is the best?
In general, here's how the options break down:
Buy your phone upfront if: You want to switch carriers regularly; you plan to keep the phone for more than two years; you don't want monthly payments.
Get standard monthly financing if: You plan to keep the phone for more than two years; you don't want to pay a lot of money upfront; you don't mind being locked into a single carrier.
Get an early-upgrade leasing plan if: You want to upgrade your phone every year or sooner; You don't mind paying a little more for the privilege.
Of course, these are very general rules. There are a lot of variations based on your carrier and if you're buying an iPhone or Android. To help you make a better decision, keep reading as we dive into the nitty-gritty details. First we'll look at the iPhone and then Android.
iPhone
As you may know, the iPhone is not a budget item. The iPhone 6 starts at $549, the iPhone 6s starts at $649, the iPhone 6s Plus starts at $749 and even the new entry-level iPhone SE will set you back $399. That's a chunk of change however you slice it, but what's the best way to do it?One-time payment
If you plan to keep the same phone for many years, you want the flexibility to switch carriers at will and you have the money, buying the phone outright from Apple isn't a bad idea.Note: Apple does offer an 18-month financing plan with "promotional financing" through Barclaycard Visa. As always with promotional pricing, read the terms carefully so you know when interest and other fees kick in. You might be better off putting the purchase on an existing credit card with a lower APR.
When you buy an iPhone straight from Apple, it comes unlocked. That means you can switch carriers at any time you choose, and even go with smaller no-contract carriers that support the iPhone.
Pros: Owning the phone gives you the flexibility to keep it for a long time, or turn around and sell it right away if you decide to go with a different model or switch to Android.
Cons: Unless you're good at selling online, you could lose some money over other upgrade options. You need to have a good chunk of money saved up.
Leasing from Apple
If you like having the latest and greatest iPhone, but still want the flexibility to switch carriers whenever you want, then check out Apple's iPhone Upgrade Program. You make a monthly payment ($32.41 for the 16GB iPhone 6s) and you can upgrade to the next iPhone model after 12 months. You do have to trade in your old phone, naturally. The plan also includes AppleCare+ to cover damage to the phone.Doing the math, you'll find that this is actually a good deal. The payments are based off a 24-month payment plan, so for a 16GB iPhone 6s the two-year total cost would be $778. That's $649 for the phone and $129 for AppleCare+, which is the same amount you'd pay if you bought them up front.
Pros: Your iPhone is unlocked so you can switch carriers at will. You can also choose to upgrade after 12 months or continue paying for 24 months and get full ownership of the phone.
Cons: If you decide you want to get out of the plan early to switch to another type of smartphone, you have to pay off the remaining balance of the iPhone.
The plan doesn't cover the older iPhone 6 or iPhone SE, which means you're likely always going to pay for the most expensive versions of the iPhone.
You also can't have the plan without the added cost of AppleCare+. AppleCare+ is a good thing to have if you're prone to damaging your phones, but some people see it as an unnecessary expense.
Poor credit can raise the monthly cost or disqualify you from the plan entirely.
Leasing from a cellular provider
If you know you aren't switching carriers anytime soon, and you might want to switch the type of phone you use, the cellular carriers have some options. However, you'll want to pay close attention to the fine print or you could end up paying more than you think you will.Verizon
On Verizon, a 16GB iPhone 6s costs $27.08 a month for 24 months. That works out to $649 total, which is the full price of the phone. You can upgrade to another smartphone after 30 days and if you've paid off 50% of the cost of the phone. That matches Apple's plan, but gives you the option to upgrade sooner than 12 months if you want. And if you don't buy AppleCare+ separately from Apple, you pay less in total.
ATT
AT&T is a bit trickier. Its AT&T Next 24 plan looks like it has a lower monthly cost at $21.67 for the 16GB iPhone 6s. However, the actual term for the plan is 30 months, and 24 months is when you can upgrade to a new iPhone. So while the total cost of the plan is $649, which is the cost of the phone, you actually pay $520 before you can upgrade vs. $375 for most of the other plans.
T-Mobile
On its website, T-Mobile offers 24-month financing, and has the typical $27 a month for the 16GB iPhone 6s. However, if you go to a retail store, you can get JUMP! or JUMP! On Demand.
JUMP! adds an early upgrade option to your existing finance plan. You can upgrade when you've paid off 50% of the current phone. You will pay an extra $10 a month for the privilege, but that $10 also includes T-Mobile's phone insurance and mobile security.
JUMP! On Demand lets you upgrade three times a year whenever you want. It doesn't have any extra monthly fees and runs on an 18-month lease, but the cost of a 16GB iPhone 6s is still $27. You would think that means you pay less in total, but that's a bit deceptive. If you reach the end of the 18-month term without upgrading, you own a lump sum for the difference of the full phone price. So, it pays to upgrade when you can.
Sprint
Sprint has the iPhone Forever plan. This lets you pay a monthly fee for the iPhone and upgrade after 12 months or once you've paid 50% of the phone cost. A 16GB iPhone costs $26.39 a month, but the leasing term is only 18 months.
Pros: More flexible carrier options that can save you money (ex. don't require AppleCare+). You can often find short-term deals that save you more than you normally would. You can choose any type of iPhone you want.
For non-Apple diehards, Verizon, AT&T and T-Mobile don't lock you into a single type of phone. You can jump back and forth between iPhone models or Android and Windows Phone if you want.
Cons: Some plans, such as AT&T, aren't a very good deal. You have to read the fine print on all the plans of your could end up paying more than you expect.
Financing, no money down and low monthly prices require you to have good credit to qualify. Broken or severely damaged phones can't be traded back.
If you want to eventually have your phone unlocked, you need to know in advance the carrier's policies. Verizon, AT&T and T-Mobile will let you unlock a fully paid for phone, but you might only have a few unlocks a year and your account will need to in good standing. Sprint lets you unlock some phones, but not the iPhone.
Android
Android smartphones are generally more complicated to talk about than iPhones because there are so many manufacturers and models to consider. The same is true when you're buying them, but depending on what you're after you can find what you want.One-time payment
Buying an Android smartphone upfront can cost from $100 to $1,000 depending on the model. The new Samsung Galaxy S7 costs $792, while Google's Nexus 6P and 5X costs $499 and $349, respectively.However, buying upfront doesn't guarantee you an unlocked phone. Some phone models, such as the new Samsung Galaxy S7, are tied to a carrier no matter where you buy. You can unlock them afterward if the carrier allows, but you might have to jump through hoops.
The major unlocked Android phones are the Nexus 6P and 5X from Google and the Motorola Moto series, if you buy from Motorola's website. These will work with any U.S. carrier.
Note that the Nexus gadgets are not available through any U.S. carrier. The only way to get them is by buying them from Google for the full upfront price.
The Nexus gadgets have the added bonus of running stock Android, as does the Motorola Moto X Pure Edition, which means no extra software from manufacturers or carriers. Plus, they get Android updates before anyone else. However, there's no financing available for these.
Pros: You can get unlocked phones that run stock Android. These are less expensive than other high-end smartphones. You can use the phone for many years.
Cons: Not all phones are unlocked or run stock Android, so you'll need to pay close attention.
Leasing from manufacturers
Few Android manufacturers have jumped on the leasing or financing bandwagon yet. Samsung has launched a leasing program from the Galaxy S7 similar to Apple's, but it's only available in South Korea for now.Motorola does offer financing for the Moto phones through a Motorola Credit Account. The Moto X Pure Edition costs $25 a month with a 24 month term. However, it is promotional pricing and if you don't pay within the term, the APR is 28.99%, so tread carefully.
Leasing from a cellular provider
If you know you aren't switching carriers anytime soon, and you might want to switch the type of phone you use, the cellular carriers have some options. However, you'll want to pay close attention to the fine print or you could end up paying more than you think you will.Verizon
On Verizon, a 32GB Samsung Galaxy S7 costs $28 a month for 24 months. That works out to $672 total, which is the full price of the phone. You can upgrade to another smartphone after 30 days and if you've paid off 50% of the cost of the phone.
ATT
AT&T is a bit trickier. Its AT&T Next 24 plan looks like it has a lower monthly cost at $23.17 for the 32GB Samsung Galaxy S7. However, the actual term for the plan is 30 months, and 24 months is when you can upgrade to a new iPhone. So while the total cost of the plan is $695, which is the cost of the AT&T model of the phone, you actually pay $556 before you can upgrade vs. $336 for most of the other plans.
T-Mobile
On its website, T-Mobile offers 24-month financing, and has the typical $27.92 a month for the 32GB Samsung Galaxy S7. However, if you go to a retail store, you can get JUMP! or JUMP! On Demand.
JUMP! adds an early upgrade option to your existing finance plan. You can upgrade when you've paid off 50% of the current phone. You will pay an extra $10 a month for the privilege, but that $10 also includes T-Mobile's phone insurance and mobile security.
JUMP! On Demand lets you upgrade three times a year whenever you want. It doesn't have any extra monthly fees and runs on an 18-month lease, but the cost of a 32GB Samsung Galaxy S7 is still $27.92. You would think that means you pay less in total, but that's a bit deceptive. If you reach the end of the 18-month term without upgrading, you own a lump sum for the difference of the full phone price. So, it pays to upgrade when you can.
Sprint
Sprint has the Galaxy Forever plan. This lets you pay a monthly fee for the Galaxy S7 and upgrade after 12 months or once you've paid 50% of the phone cost. A 32GB Galaxy S7 costs $25.99 a month.
Pros: More flexible carrier options that can save you money. You can often find short-term deals that save you more than you normally would. You can choose any type of phone you want.
Cons: Some plans, such as AT&T, aren't a very good deal. You have to read the fine print on all the plans of your could end up paying more than you expect.
Financing, no money down and low monthly prices require you to have good credit to qualify. Broken or severely damaged phones can't be traded back.
If you want to eventually have your phone unlocked, you need to know in advance the carrier's policies. Most will let you unlock a fully paid for phone, but you might only have a few unlocks a year and your account will need to in good standing.
