Buyer Beware: Why Early Phone Upgrades Are a Bad Idea

Photo by Evgeniia Freeman / Shutterstock.com

This post comes from partner site WhistleOut.com.

While most of us hold on to our smartphones for about two years before upgrading, many cellphone carriers put a lot of marketing muscle into designing attractive offers to encourage us to upgrade our phones every year.

But just because we’re eligible for a phone upgrade offer doesn’t mean we need it. In fact, skipping the upgrade can save us money. Here’s why:

How early upgrades work

In a nutshell, these plans allow users to upgrade to a new phone before they’ve fully paid off their old one.

Scenario: Let’s say you buy a brand new phone on an 18- or 24-month payment plan with a $24 per month payment (this does not include the charge for your cellphone service). After 12 months of payments, your carrier tells you that you’re eligible for an early upgrade.

You decide to do it, so you turn in your year-old phone that you have paid $288 towards (12 months at $24 per month) and get a brand new phone. You then sign another 18- or 24-month device payment contract and start your payments all over again.

Savings loss: When you turned in your “old” phone after a year, you not only lost all the equity you built up (the $288 already paid towards owning your phone) but also all the opportunity gains of owning your phone.

And, when you signed up for your early upgrade, you entered into yet another phone payment contract. By extending the amount of time you are obligated to be with your phone carrier, you also cut yourself off from taking advantage of competitive deals offered by other carriers.

Before you can switch carriers, you will need to pay off your remaining device balance in full. Yes, some carriers do offer to pay off your devices so you can switch, but they also often require that your device be a specific, eligible model and in very good condition.

Another sad truth is that you may have purchased an upgraded device with very little upgrade, meaning that sometimes the latest and greatest model really isn’t that different from its earlier version.

A slightly larger screen, some water-resistant casing, a new color are a few lackluster upgrades that most people can do without.

Cons of early upgrades

  • loss of the equity you’ve built up with your “old” phone payments
  • extended the amount of time you are with your carrier by another 18 to 24 months
  • additional cost of phone insurance (on average, an extra $12 per month) since your phone needs to be of very good quality when you turn it in for upgrade

Pros of owning your phone

  • lower monthly cellphone bills because you’re paying only for your service data plan, not your device
  • have an easier time switching carriers and take advantage of the competitive deals
  • have an extra, just-in-case phone or a hand-me-down for a family member if you choose to purchase a new phone later on

As we enter the season of new smartphone releases, are you tempted to upgrade your phone? Share your thoughts with us in comments below or on our Facebook page.

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