Carrier Is AT&T Next or on-contract less expensive?

Discussion in 'iPhone' started by ptb42, Oct 19, 2014.

  1. ptb42 macrumors 6502a

    Joined:
    Oct 14, 2011
    #1
    Every once in a while, especially when AT&T or Verizon changes their service plans or offers a promotion, a debate erupts about whether AT&T Next is a better deal than buying an iPhone on a 2-year contract.

    There are always a lot of assertions flying back and forth, and it usually degenerates into "you can't do math" among a few. So, I decided to do a definitive calculation. Feel free to correct it, clarify it, and refer to it as necessary.

    The short answer: it depends on your data plan. Over a two-year period, the 6GB/month (or less) plan is cheaper on-contract, and the 10GB/month (or more) plan is cheaper with AT&T Next or buying the phone outright.

    I'll compare the 6GB/month and 10GB/month plans to demonstrate. My assumptions:

    1. I'm using the latest AT&T Next terms/conditions. If you did these calculations before AT&T changed them to compete with T-Mobile, your calculations are out-dated.
    2. You buy a 16GB iPhone phone new.
    3. You keep the phone for the entire 24 months.
    4. The phone is yours to keep (or sell on your own) at the end of the 24 months.
    5. Buying with Next is the same as buying the phone outright, and just spreads the cost over equal payments. I didn't take the time-value of money into account.
    6. Any activation fee (on-contract, but not on Next) isn't included. I've read that some people are getting that waived anyway, but this could be a net gain for the Next alternative.
    7. Taxes aren't included. You won't have to pay sales tax on the phone subsidy if you buy on contract, but you'll pay sales tax and perhaps all the other taxes on the increased device fee for the life of your contract. This may be a net gain for the Next alternative.
    8. Cost of monthly service is as listed on AT&T's website. If you have a corporate discount, the price differential without taxes should remain the same. But, you may find that the taxes and fees on service may change the bottom line.

    6GB on-contract:

    $199 for the phone.
    $120/month ($80 for service, $40 device fee).
    $2,880 for 24 months of service.
    $3,079 is your total over 24 months.

    6GB with Next or buy outright:

    $649 for the phone.
    $105/month service ($80 for service, $25 device fee).
    $2,520 for 24 months of service.
    $3,169 is your total over 24 months.

    As you can see, on-contract is less expensive, by $90 over 24 months.



    But, let's do the calculations for 10GB/month:

    10GB on-contract:

    $199 for the phone.
    $140/month ($100 for service, $40 device fee).
    $3,360 for 24 months of service.
    $3,559 is your total over 24 months.

    10GB with Next or buy outright:

    $649 for the phone.
    $115/month service ($100 for service, $15 device fee).
    $2,760 for 24 months of service.
    $3,409 is your total over 24 months.

    The cost advantage has flipped: using Next or buying outright is the least expensive, by $150.



    You'll find these price differentials are the same for all other plans: 6GB/month or less is $90 less expensive on-contract, and 10GB/month is $150 less expensive with Next. If you buy more than one phone and put them all on the same plan, then simply multiply the differential by the number of phones. The amount will also be the same, no matter which phone you buy.

    Of course, there are other considerations. I'd like to buy a phone out-right, so it's unlocked and I can put a European SIM in it when I travel (you have to buy it from Apple, as the carriers will keep it locked for a while, even if you pay full price). Some may prefer the opportunities for early upgrade under Next. But, I wanted to choose a set of conditions for which "before" and "after" were exactly the same, so I could do a direct comparison.

    I'm also not going to try to do the calculations for your grandfathered plan. Also, please note that if you took advantage of AT&T's offer to offer Next or off-contract rates to people that are still on-contract, you can't sign a new two-year contract and keep those discounted rates. You must buy your new phone outright or with Next, or your monthly service rates will revert to the on-contract rates.

    If someone wants to follow up with a similar comparison for Verizon, please do so. If I can, I'll change the title to reflect the addition.
     
  2. ineel macrumors regular

    Joined:
    Jul 8, 2010
    #2
    If you are on 10Gb mobile share plan then you will save $190 over two years on NEXT, if you are on a plan less than 10Gb, you will save money by going on a contract. Its as simple as that.
     

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