Why is Buying a Cell Phone so Confusing?
Pro Tips

Buying a New Cell Phone is Confusing. Here's Why.

Last Updated:

News flash! Buying a new cell phone isn't the same as it used to be. You've probably noticed this already though, particularly if you've gone through the purchase or upgrade process in the past year or two.

So, what's the new modus operandi? Well, for starters, subsidies are gone. Secondly, the "free" mobile phone has been replaced with an array of confusing options. Thirdly – and this may surprise you – this isn't necessarily a bad thing.

I know what you're thinking: how could confusion possibly be a good thing for mobile consumers? It's not – however, the shift away from subsidized devices can offer you greater freedom and protection for your wallet. Still, the question remains: why are cell phone buying plans so confusing?

In this guide, I'll give you a rundown of the options that have replaced cell phone subsidies and how wireless carriers have structured these choices. I'll also tell you how we make it simple for you to find the best cell phone plan to meet your needs.

Device Purchase and Lease Options

Remember the good old days when you chose the phone you wanted, paid a deeply discounted price – or nothing – and didn't have to think about it again until your two-year contract was up? Me too. Alas, those days are over.

Something had to fill the void, and in this case, several somethings have cropped up to take the place of two-year contracts with cheap smartphones. Instead, you've got financing, leases, and no-contract plans. All of the major providers offer unlimited plans as well as family plans, with device payment options carrying across all of the offerings.

Find Out Now

Tired of High Phone Bills? Calculate Your Savings!

Save Now

Here's what you can expect to choose from with most wireless carriers:

  1. Device Payments: Even though contracts are a thing of the past, cell phone financing serves essentially the same purpose. If you choose to pay your phone off in installments you're tied to your carrier for 18-24 months. On the plus side, you own your phone at the end.
  2. Leasing: This option is just what it sounds like – you rent your device. You may want to lease a phone if you prefer to always have the newest model because you can trade in without owing the balance on your current device. It's a good idea to buy phone insurance in this case, however, because if your phone gets damaged you'll be responsible for the cost of fixing it.
  3. Paying in Full: Whether you buy your device from your carrier, or from a retailer, buying outright is the most expensive option up front. In the long run, though, your monthly bills will be cheaper and you'll be able to take your phone to another carrier at any time.
  4. Early Upgrade Plan: This is the most confounded of the cell phone buying options. In some cases, the early upgrade is tough to distinguish from a lease. With some carriers, you'll even pay an extra fee just for the privilege of the early upgrade option – above and beyond your device payment.

Unlike with the subsidy structure, there's no one cut-and-dried industry standard for all of these options. Device agreement details differ from provider to provider; naturally, that means costs do too.

Pro Tip: Purchasing a cell phone may be confusing, but the practices and terminology employed by wireless carriers are just as befuddling. This can cause millions of consumers to switch to a different wireless carrier.

Given the variety of choices when it comes to your new cell phone, you're probably wondering what each carrier offers in terms of getting your hands on that must-have device.

Buying a New Cell Phone is Confusing. Here's Why.

Verizon Wireless

The good news is Verizon Wireless offers the simplest device payment options of all four of the major carriers. The bad news? Big Red no longer provides an early upgrade plan.

Device Payment

You have three choices when it comes to buying a phone on the Verizon network:

  1. Buy your phone outright. You can either purchase through Verizon or buy from a third-party retailer. Just remember that you'll need a CDMA device rather than GSM. Not sure what that means? We've got you covered with our guide to CDMA vs. GSM.
  2. Make device payments. No clever name, no confusing terms. The old Verizon Edge program is gone, replaced with this simplified plan. You make monthly payments – each equal to 1/24th of the retail price - and at the end of two years, you own your phone.
  3. Sign up for a "free" Verizon phone. Before you get too excited, it's important to understand that even with their "free" device offer, you're still tied to the carrier for two years. The deal is structured so that you're signed up for device payments, and then you receive a credit each month in the same amount of the payment.

You've probably figured out the bottom line by now. Even though two-year contracts are technically done and gone, you're still going to end up tied to your carrier unless you pay for your phone in full.

Upgrade Options

Verizon Wireless has done away with early upgrades. The only way to upgrade to a new device is to either buy one outright or wait until your device payments are done.

This is a blessing and a curse: you won't be able to get the shiniest new smartphone every year just by trading in, but you also avoid the complicated – and often more expensive – upgrade structures offered by the other carriers.

AT&T

While AT&T has simplified its device payment plans to some extent over the past couple years, it's still a fairly convoluted setup, and not necessarily the greatest deal in the long run.

Device Payment

The way AT&T device payments are structured, they function as both financing and upgrade plans. If you want to upgrade when you reach eligibility, you must trade in your device. You are not required to upgrade – rather you can simply make all of your payments and own your phone at the end.

The plans are called AT&T Next and AT&T Next Every Year. While the situation is an improvement over the multitude of mind-boggling plans that have been eliminated, it's still way too fussy. Plus, it may not be a good financial decision for some customers, and it ties you to AT&T for the duration of your payment agreement.

  • AT&T Next: This option allows for the lowest monthly device payments. The agreement is set up over 30 months, and you can upgrade after 24 months. In other words, you're eligible for an upgrade (with trade-in) when about 80% of your phone balance is paid off.
  • AT&T Next Every Year: With Next Every Year you'll make slightly higher monthly phone payments, over a period of 24 months. The payoff is that you'll be eligible for an upgrade after paying off 50% of your device balance, or at about one year of the agreement.

If you have less than perfect credit you may be required to make a 30% down payment in order to enroll in one of these plans. That's not all bad – you'll end up with lower monthly payments.

Is AT&T Next a Good Deal?

Here's the thing: even though the carrier makes a point of emphasizing on its website that this is a financing program and not a leasing plan, when you get down to the nitty-gritty it might as well be a cell phone lease. Why? Let me explain.

Using the Upgrade Option

Say you sign up for the Next program and make your 24 monthly payments, then upgrade to a new phone. Now you've got a new two-year payment obligation and you don't own your own phone because you turned it in when you upgraded.

Now, let's say you continue doing so each time you're eligible to upgrade. Theoretically, you'd never own your device outright, yet you'd have made hundreds – or thousands – in payments over the years. Essentially you're leasing your phones. Even though AT&T classifies Next as a purchase plan, you're losing any equity you've built up because you can't sell your device.

Paying Your Device Off

If on the other hand, you follow through with all of your required payments, you then own your phone, and you're not under contract so you're free to switch carriers if you like. During those 24 or 30 months, however, your device payment plan is basically like a contract - unless you pay off your balance in full you are not free to change providers.

If you're okay with being tied to AT&T for the duration of your payment plan, paying your device off in total is likely the best choice. This way you can either sell your phone or pass it down to another family member, and you won't have thrown away the payments you put into it.

Related: You can learn more about AT&T's cell phone plans here.

T-Mobile

T-Mobile does a lot of things right – like including taxes and fees in their advertised price and keeping their plans extremely simple. When it comes to confusing cell phone buying – and particularly upgrade – plans, however, the Un-carrier takes the cake.

Device Payment

Plain old-fashioned device financing is pretty straight forward on T-Mobile. The provider calls it the EIP – Equipment Installment Plan. You pay for your device over 24 months, and whether or not you have to make a down payment is determined by your credit rating. At the end of the two-year period, you own the device.

One notable perk with T-Mobile's EIP: you can make early – extra – payments if you want to reduce your balance (unlike with most carriers, which require you to pay the whole balance at once if you want to pay early).

Jump! and Jump! On Demand

This is where your eyes may start to cross. As with AT&T Next, Jump! is both a device purchase and an upgrade program, and has undergone various incarnations over the years.

This continual flux has kept not only customers guessing as to what's what, but according to the internets (most notably the Redditsphere) clarity has suffered among customer service reps as well. More on that in a minute. First: details.

Jump!

The original version of this plan gets you:

  • Device insurance (including AppleCare)
  • Lookout Mobile Security
  • Upgrade eligibility once 50% of device is paid off (trade-in required)

Jump! costs $9 - $12 per month, although $8 of that is offset by the fact that you get device protection for free. Essentially you're paying about $250 over the course of your device financing agreement for the privilege of upgrading after one year instead of two.

If you want Jump! you must subscribe to it within 14 days of starting your new line.

Jump! On Demand

This option allows you to upgrade at any time, up to three times per year. It doesn't cost you that extra monthly fee like plain Jump!, however, it doesn't come with insurance or Lookout Security either. Unlike plain Jump!, the On Demand version must be initiated immediately upon starting a new line.

T-Mobile calls Jump! On Demand a lease plan, although there are ways to buy your phone if you so choose. The program runs 18 months. Each time you upgrade your phone the 18 months begins again.

If you have chosen not to upgrade during that time, you can either pay off the remaining balance (six months of payments) at once, or you can enroll in the Purchase Option Installment Plan. The POIP, as T-Mobile dubs it, is a nine-month interest-free payment plan at the end of which you'll own the device.

You may be asking yourself, ok, what's the catch? I'll tell you. You've seen the ads that tout no down payment – "ever" – for upgrading on JOD. That's not totally true. There's no down payment on your upgrade

You've seen the ads that tout no down payment – "ever" – for upgrading on JOD. That's not totally true. There's no down payment on your upgrade if you meet T-Mobile's credit requirements and you're getting a base model premium smartphone. For example, if you choose the S7 Edge instead of the plain S7, you'll make a down payment.

Is Jump! a Good Deal?

Unless you absolutely must have the newest cell phone every single year and aren't willing to pay off the rest of your phone balance to get it, the regular Jump! program is not a wise financial choice.

You're paying about $120 over a year's time for this trade-in program, just to upgrade sooner. And that's if your phone doesn't have any damage. If it does, you're going to pay the insurance copay – $175 at the time of this writing – just to trade it in. So then you've paid $295 extra overall. With only a year left in your financing, that amount could have just paid off the balance on a $600 phone, which you would then own outright.

Jump! On Demand might sound like a better deal, since it's free, however, you should consider whether you'd even want to upgrade two or three times in one year. If you're a Samsung Galaxy S series or iPhone devotee, you're only going to see a new device once per year anyway. Ultimately there's not much to lose though, as there's no cost and you can choose to simply by your device at the end anyway if you want to.

If you're going to finance your iPhone or Android phone rather than buy it outright, and you're planning to buy insurance anyway, plain Jump! isn't the worst deal ever. Jump! On Demand is okay if you prefer a lease and want to try multiple phones in a short time period.

Sprint

Sprint offers both purchase and lease options, as well as an early upgrade plan. At the time of this writing, the carrier even has some free phone options.

Device Payment

Sprint's device purchase option is called Sprint Easy Pay. It's essentially the same as the other major carriers' purchase agreements – the phone's cost is split up over 24 monthly installments. You own your device at the end unless you're on the upgrade plan (which I'll get to in a minute).

You may have to make a down payment on your device, depending upon the mobile phone model and your credit score. On the plus side, your monthly payments would be lower in this case. You'll also be responsible for paying applicable sales tax at the time of initiation.

Device Lease

There are only a few devices eligible for a Sprint lease. You won't find devices like feature phones or flip phones on the list. They're high-end flagship smartphones, which means your device payment will run about $27 - $32 per month.

At the end of your 18 months you've got a few choices:

  1. Upgrade: Turn your current device in and start a new lease. As with the other major carriers, your phone must be in good working condition. This means no broken screen, water damage, or other significant defects.
  2. Go Month to Month: Keep your phone and pay on a month-to-month basis. This option is convenient if you're waiting for a specific device to be released, or if you're just not sure you want to commit to another long-term lease.
  3. Buy Your Device: There will be a Purchase Option Price. This amount is equal to six more months of payments and is typically under $200.

If you want to cancel your lease early you'll have to pay the remaining lease payments, in addition to the Purchase Option Price. At this point, you can keep your phone, or you can turn it in and receive account credit for the Purchase Option amount.

Galaxy Forever and iPhone for Life

Sprint's yearly upgrade programs for the Samsung Galaxy S series and iPhone are a boon to those who always want the latest flagship device. Essentially these programs are just like the 18-month lease, except you get an automatic optional upgrade after 12 months.

If you choose not to upgrade after 12 months – for whatever reason – you have three options at the end of your 18-month lease term:

  • Pay month to month
  • Buy your phone by paying the remaining purchase balance
  • Upgrade to any smartphone

Sprint introduced the Galaxy Forever program in early 2016, discontinued it over the summer of the same year, and then brought it back in early 2017 with the release of the Galaxy S8. The point being: if you want this deal, get it ASAP because there's no guarantee it will stick around.

Sprint Discounted Phones

Subsidized phones are long gone, but Sprint does still provide an option to get your phone for free or at a reduced cost.

Free Phones: Choose an eligible model. At the time of this writing, devices include the LG Tribute 5 and LG Tribute HD. If you're looking for a family plan, there are even free Galaxy J3s for the whole family. You must sign up for a device payment plan. You will then be issued a rebate in the form of a prepaid debit card in the amount of the phone's price.

You are still on the hook for all 24 monthly payments, however, so you won't be able to just take the free phone to a new carrier until your payment agreement is fulfilled.

Discounted Phones: At this time, Sprint is offering several phones at 40 – 50% off the regular price. They're even offering a Galaxy S8 lease at half-price - $15.63 per month for 18 months.

Early Upgrade

By now you're probably asking the question: "What about an early upgrade?" There is an option.

For $5 per month, you can add the option to upgrade after one year to your account. This may be used on both Easy Pay and Sprint lease agreements. You must put this trade-in program on your account within 30 days of device activation.

Unlike T-Mobile Jump!, Sprint's early upgrade program doesn't include device protection. That'll run you another $9 per month.

Apple iPhone Upgrade Program

There's one more option specifically for iPhone fans. You can go directly through Apple instead of financing through your carrier. The iPhone Upgrade Program works as either a lease or a purchase, whichever you choose. You can upgrade to the new iPhone every year if you choose, at no extra cost. Plus, you get free AppleCare+.

Monthly prices range from $32 to $45 for the current models – iPhone 7 and 7 Plus, depending on the memory size you want.

Is the Apple iPhone Upgrade Program a Good Deal?

If you're going to finance your iPhone anyway, this option may be the best choice. Why? Because the payments are similar to what the major carriers charge for the device itself, but you get protection that usually ends up cheaper than carrier insurance.

AppleCare+ provides you with coverage for up to two incidents over a two-year period. Those incidents may be two cracked screens, two other kinds of damage, or one cracked screen and one other type of damage. A broken screen will set you back $29 while other repairs/replacement cost $99.

If you choose Sprint's Total Equipment Protection service plan, for example, you'll pay $9 a month. Over two years, that's $216. Plus, you'll pay a $100 deductible for your repair or replacement (less if you have an older model).

Now, the caveat to that is if you're particularly concerned about theft or loss. The major carriers cover these events, AppleCare+ do not.

Save Now

Compare Cell Phone Plans

Save Now

MVNO Phone Financing

What if you choose service with a smaller wireless provider? MVNOs (Mobile Virtual Network Operators) are typically prepaid or pay-as-you-go cell phone carriers that provide no-contract plans. In the past, there was no device financing available through these carriers – you simply bought your phone outright.

Now, however, finance companies are getting in on the MVNO action. This can be a good thing – but you've got to be very careful. Why? I'll use two of the main MVNO financing options as an example.

Affirm

Republic Wireless and Red Pocket Mobile are currently the most prominent wireless providers using Affirm financing. If you go this route, you'll choose a repayment period between 3 and 18 months, at between 10% and 30% interest, depending upon your credit. You can choose from both iPhone and Android phone models.

Affirm is the most reputable and affordable phone financing option outside of traditional carrier financing. You'll pay more for your device, however, you won't pay predatory fees, at least according to the company itself – just interest on your loan.

SmartPay

SmartPay is a more expensive choice, and probably not a great one. Cell phone carriers that offer the option of applying for SmartPay financing include Straight Talk Wireless and Page Plus Cellular.

Why is SmartPay a poor financial decision? I used the SmartPay calculator tool on the Page Plus Cellular website to calculate the cost of a $400 phone under this financing program. Here are the results, assuming a 12-month "lease":

  • Down payment: $60
  • Monthly payment: $74.18
  • Total amount paid: $950.16

You can choose to pay for your phone over 6, 12, 18, or 24 months. You can buy the lease out within 90 days if you choose, however, this will still cost you more than the phone's value. For example, you'll pay $480 for a $400 phone.

SmartPay calls this plan a lease, although you do own the device once you make all the payments.

Here's a better alternative to SmartPay: pay cash for a lower-end prepaid or pay-as-you-go cell phone. Meanwhile squirrel away that money you would have paid to an exorbitantly priced financing scheme. Within just six months you'll have enough money to buy that phone you originally wanted.

It all boils down to this: if you decide to go with MVNO device financing, make very sure you read the fine print - thoroughly.

Related: How Can I Build the Perfect Cell Phone Plan for Me?

The Bottom Line

Why are cell phone buying plans so confusing?

Generally speaking, making things ultra-simple for the customer isn't good for a carrier's bottom line. Additionally, wireless providers had to do something to keep customers coming back month after month now that contracts and subsidized phones are gone. It's easier to switch now more than ever before. Wireless providers are protecting their profit margins more than ever, especially with the virtual extinction of overage charges and early termination fees.

If you do choose to finance, go with the option that fits your lifestyle the best. Leasing is good for frequent upgraders, while a typical payment agreement is better if you plan to stick with the same device and carrier for a couple of years.

Shopping for a wireless carrier or service plan? See how much you can save by going to our cell phone savings calculator. Then, head over to our convenient cell phone plan comparison tool which helps you find the best deal on cell phone plans. We'll help you find any plan you want - unlimited plans, family plans, data bucket plans, even flip phone plans - in just a few clicks.

Find Out Now

Tired of High Phone Bills? Calculate Your Savings!

Save Now