Financing vs Buying Outright - Or is there another option? May 15 2016

Financing vs Buying Outright
Or is there another option?



The Change

A big change has been happening over the last several years. Our cell phone companies have finally phased out those darn two-year contracts! So all things in the world should be right now, correct? Not, so fast! Those two-year contracts have now been replaced by finance plans. WHAT? Yes, financing your cell phone is the new trend. But wait there’s more…………. And we will get into all of it for you! Stick with me here and you can save a lot of money……….


Buying Used Phones



The options for new phone purchases

Two-year contract, finance a phone, lease a phone or pay full retail pricing. Make no mistake going forward, if you bought or are going to buy a new phone you paid or will pay full price for it, one way or another!

The reign of the 2 year contract

It you have bought a new cell phone anytime in the last 20 years then you have signed one of those pesky two-year contracts. These contracts came about in the early age of cellular when companies were putting a ton of money into their networks and development of future networks. Back then it made sense. Say a cell retailed at $300, the company was willing to offer it to you for only $50, as long as you agreed to say with them for the length of the contract. What they didn’t mention is they had raised the price of the plans to include enough to cover the last $250 of the phone! While these contracts did upset people, companies found they were even more upset when asked to pay $300 for their new phone. The only good news was you owned that phone from day one. If you didn’t fulfill the contract the company would come after you for the balance of the term. This was known as subsidizing and became the norm until recently. The reign of the two-year contract looks to be over with. Now there is a new way to get that money out of your wallet!

Financing a phone?

Who ever thought that those words would form a sentence? Well, they do and financing has now become the most popular way to purchase a new cell phone. The good news is, those two-year contracts are gone and you can now get the same phone for only $25 a month! Great, super awesome, sign me up. Whoa there cowboy, let’s take a closer look at the end result. In its simplest form you just agreed to pay a whopping $600 for one cell phone! Not so excited now are you? So what just happened here? Well, if you finance a phone through your carrier they will lower your monthly bill by say $15. What they did here is make you pay full price for your phone and tell you it will save you money. The $15 you supposedly saved? You actually paid for as part of that $600. So you see, it’s the same really. Nothing changed and you will pay the same amount over the two years you would have been in contract. Except now your cell phone bill is through the roof! So you are not under contract, but what if something happens to that phone you just financed?

  • Lose your phone = still owe remaining balance
  • Break your phone = still owe remaining balance
  • Move to another carrier = still owe remaining balance
  • Move to an area there is no coverage = still owe remaining balance

You get the point. You financed the phone, so no matter the situation you are on the hook for the price of the phone! Kind of sounds like being in a contract, doesn’t it? It gets even better though. Since you financed the phone, you don’t own it. It’s not your phone until it’s paid off. So if you don’t make that payment for any reason, they will blacklist your phone. What does this mean? It means no one can hook that phone up to an account. You pretty much have a nice paperweight. Not so sure those contracts were so bad anymore?


Leasing a phone?  

Leasing a phone gives you the option to get a NEW phone every year and may even be a couple bucks cheaper at first. Turns out if you get a new phone every year you will pay more than if you had financed the device. Unless, you are a super tech lover with disposable income I would not suggest leasing a phone! The advantage of financing a phone is at least you own it and can do what you want with it once it’s paid for. In a lease that is not the case. You have to turn that phone in for a new one or many times pay a balloon payment to keep it. Should we even wonder what happens if you break it.


Pay retail pricing

This is something most people just don’t do and for understandable reasons. Here is a little sample pricing of current Verizon phones as of 5/15/16.

  • iPhone 6S - $649.99
  • iPhone 6S Plus - $749.99
  • Samsung S7 - $672.00
  • Samsung S7 Edge - $792.00


Yes, those are the newest of the new. What happens when you get last year’s model or even several models back?

  • iPhone 6 - $549.99
  • iPhone 6 Plus - $649.99
  • Samsung Galaxy S6 - $576.00
  • Samsung Galaxy S5 - $552.00

Really, not much better considering that you are buying and older model phone. There are several reasons to buy retail and they include: Owning your phone from day one, the ability to move carriers with little no money owing, the ability to sell your phone if you like and apply that to another new phone. If you can afford to buy phones outright then you will enjoy a much lower monthly bill then those around you. While your bill might run $145 for two lines, your neighbors might be paying around $200 for the exact same number of lines and service. They pay more because they have financed or leased phones.


What’s the answer?

So as you can see you end up paying the nearly the exact same amount no matter what route you chose to go. Some routes (full retail) give you the advantage of a lower monthly bill and leave open the option to finance/lease a phone later. Others get you into new phones fairly cheap on the front side (finance) but once your new bill shows up you will remember those phones weren’t free. Then there is the really crazy (leasing) plan where you own nothing, you end up paying more and your bill stays high.


After years in the wireless industry I have watched all these changes occur and it has been an interesting ride. The answer myself and many others have come up with if your buying phones from a retailer you are going to pay full price or even more. My best advice is to look for a Certified Used Phone that meets your needs! By purchasing a quality used phone you will automatically save that same $15 as financing and leasing do. You will own your phone from day one like buying retail does. If you want to trade it in or move carriers you can do that without penalty. It’s a lot like buying a car these days. While the newest ones are nice they are not necessarily the best option. Buying a car that is a few years old from reputable dealer is a good way to go. The same is true for cell phones! New to you is easiest on the pocket book.

Here is some comparison pricing:

  • iPhone 6 - $400
  • iPhone 5S - $300
  • iPhone 5 - $225
  • iPhone 5C - $200
  • Samsung Galaxy S5 -$225
  • Samsung Galaxy S4 - $150
  • Samsung Galaxy S3 - $100

You can easily see how saving money is possible. If you have more than one line on your account you may have to make some changes you are not use to. The first one is not everyone needs to get a Certified Used Phone at the same time. Spread everyone out over the year and stick with it. By doing this everyone can end up with a new phone and not feel a broken pocket book. I suggest buying from a company that is willing to give you more than a 30 day warranty! I would look for a company like who offer a 60 day warranty. A longer warranty gives you peace of mind that the company you have chosen is willing to back up their products.


You can have a low cell phone bill – You can have a nice phone – You can have good service! It is all possible with a little planning. If you have any other questions please feel free to email us at 


For more detailed information about each carrier check out my friends at Life Hackers!