I want a new iPhone 6s. Looks really fun. But AT&T has three options and I can’t quite figure out the difference between “AT&T Next”, a contract and a no-contract phone. Can you walk me through it, Dave?
There are a couple of givens in the tech industry, one of which is that whatever you buy is only going to be the cutting edge for a week or less and that as soon as your warranty ends, something’s going to break. The third mainstay of tech is that we won’t be able to understand our cellular bills and how carriers price the new phone we want to buy. <a href=”http://wireless.att.com/” target=”_blank”>AT&T Wireless</a>, <a href=”http://www.verizon.com/” target=”_blank”>Verizon</a>, <a href=”http://www.tmobile.com/” target=”_blank”>T-Mobile</a>, they all tend to have rather complicated mathematics behind how they price things because they’re selling very expensive devices while trying to minimize the price tag.
You asked about AT&T Wireless, so let’s have a look at the brand new Apple iPhone 6s at a base 16GB configuration.
Go to the Web site and you’ll see the following as the AT&T Next price:
Click on the pop-up and you’ll find you can specify “Next 12”, “Next 18” or “Next 24”.
But there are other options! Click on “2-year Contract” and you’ll see this:
One more. Choose “No annual contract” and you’re buying a mobile computer outright:
So how do these all compare? Turns out that modern cell phone and mobile phone purchases end up being a lot like car purchase options. Getting a new car? You can lease, get a loan and make payments, or buy it outright. With a lease, of course, the car company regains ownership of the vehicle at the end of the lease period, while at the end of the car loan payments, you own the car.
That’s how the iPhone 6s is priced in this case: the “lease” is AT&T Next, the loan is “2-year Contract” and the outright purchase is “No annual contract”. The big difference is what happens after you’re done paying.
To make it a bit more complex, AT&T Next can be set for 12, 18 or 24 months, depending on how soon you’ll want to upgrade yet again. Not “upgrade” as in keep your phone, of course, because AT&T Next requires that you turn in your phone (with a caveat we’ll get to in a minute).
So let’s look at the pricing for AT&T Next’s “lease” of the iPhone 6s. With 16GB it’s $649.99. If you decide that you’ll be happy with the phone for two years, you can get away with $21.67/month for those two years, at the end of which you can go in and trade up for a newer, fancier, faster device. For an 18mo span, it’d be $27.09/mo, and if you’re someone who wants to upgrade every year, you’ll be paying $32.50/mo.
Let’s do the math. At $32,50/mo * 12 months, you’ll pay $390 in what amounts to depreciation (since AT&T sells refurbished phones, they’ll just clean up your old one and resell it). For 24 months, it’s $520, leaving a remaining balance versus having bought it outright of just under $130. Make sense? Remember, those are with zero due when you get your phone, it’s just another charge tacked onto your cellular bill each month.
Here’s a neat thing too: If you decide after a year that you’d rather just keep the phone and wait another year or two, you can keep paying for a few more months and the phone’s yours free and clear. (specifically, 20 payments in total gets you ownership on the Next 12 plan, 24 mo on the Next 18, and 30mo on the Next 24 plan).
Which one’s best for you? As with a car, it depends on your expected usage and what you want to do in 12/18/24-months. It’s a sure bet that in two years, there are going to be new phones that make the Apple iPhone 6s look old and clunky. If that bugs you, then AT&T Next might just be something to examine more closely.
Note: Every major cellular carrier in the United States has a program similar to AT&T Next. They can be a really good deal if you want to minimize your payments while always being able to upgrade to the latest and greatest. Just remember you have to turn in your current phone to get the new one each time.