iPhone 6: Pay in Full vs. Installment Plan

iPhone 6 Debut? Looking at August

iPhone 6iPhone 6 is already stirring things up with the options of payment in full for the phone vs. going with an installment plan. Traditionally, major phone carriers have offered contracts with a variety of service plans, but things are changing. These changes all point to putting money in “their” pocket. iPhone 6 is also expected to have some attractive changes of its own. The debut for this savvy little phone is expected to unfold in August.

When this new iPhone 6 comes out, it will behoove consumers to study in depth all of the purchase plan options. The expectation is to be prepared to pay more overall. Previously, wireless carriers would charge $200 down, subsidizing the device of choice along with a two-year contract. However, under the view of the new plan the consumer would pay nothing up front; rather, would pay a higher monthly bill. That monthly fee will be dependent upon the carrier.

Last year, T-Mobile was the first major U.S. carrier to drop the two-year service contract; however, other major carriers are beginning to follow suite. AT&T and Sprint offer a $200 phone with contract, but do not disclose the details of the plans online, making it hard to sign up on websites. Verizon still has a standardized offering of a subsidized plan for these smart phones. Regardless of choice, costs will be up. Options will be to pay “in full” for the phone up front, or choose the “no money down” option. The real question is, when purchasing the iPhone 6, which option benefits the consumer vs. benefiting Apple or the carrier?

Paying full price for any subsidized phone will typically reduce the monthly fee by $10. The iPhone 6 is projected to be priced at somewhere between $650-$760, and when paid in full will more than offset any monthly savings. Paying $200 up front is more cost-effective than when going with no-subsidy and zero down, in which the monthly bill is projected to be about $28 more per month. Over a 1 year period, the un-subsidized phone will cost $75 more than if there had been a two-year contract. These estimates come from Kevin Smithen, a Macquarie Securities analyst.

No surprise that the cell phone companies are pushing their “new” no-contract plans, as it is more money in their pockets. When reviewing the numbers, $75 per year, per phone, equates to a whole lot of money where volume is concerned. That¬†type of volume screams big business-big profits for the cell phone carriers. This plan absolutely serves the carriers as they no longer have to pay hefty upfront subsidies to Samsung, Apple and any other carriers. It is expected that nearly 41 percent of smart phone activations will be unsubsidized by the end of 2014. This would account for one-third of the customers from Verizon, Sprint and AT&T; and approximately three-quarters of the users from T-Mobile, according to Smithen.

Those percentages are expected to be much higher with the iPhone 6’s heavy marketing strategies in place. Protecting the pocketbook will boil down to choice: the better option for the consumer will be the “old-fashioned” $200 phone with the two-year contract, if you can find it. Do not be fooled by the cell phone carrier’s plan which offers “the promise to save with no money down,” as that is the plan that is pocketing the savings into their bank account. The “upgrade frenzy” will begin soon. It is expected that bigger screens will be available due to demand.

Shopping savvy can be a headache, but the phone carriers are radically changing how they bill customers. On Saturday, AT&T rolled out a change-up in the pricing by slashing the family smart phone plans. Carriers have different labeling for their plans and the plans do vary somewhat in detail. All are reasonably reliable and fast; however, old shenanigans remain as new options are unveiled in the arena of price competition. As the old saying goes, buyer beware. Each of the carriers will be revealing new plans and with one of them, after sifting through all the details, the price could be doubled. Again, August is the target time to be on the look out for the arrival of the new iPhone 6. When purchasing the iPhone 6, carefully review the details when studying the options as to whether to pay in full or go for the no money down with the installment plan.

By Jill Boyer-Adriance

CNN Money
Market Watch
Investor’s Business Daily¬†

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