Heres another post on not understanding why its even a question. Because the iPhone holds its value so well, you will pay less or MAKE money to upgrade each year.
Last year I sold my 4S for 450, paid 450 for an early upgrade, then got a $200 credit from AT&T. I made 200.
This year I'll sell my 5 for 550, buy the 5S for 650, no contract extension, only cost 100 which is 100 LESS than some guy buying on contract.
Its a no brainer, and people who don't do it are not smart.
What was the $200 AT&T credit for? I was an AT&T customer and was able to get the early upgrade price but it's not like they are just throwing around $200 credits (at least back then they were not).
I don't think people who choose not to upgrade aren't necessarily smart... some people just don't need to always have the latest and greatest.