How Much Does That Phone REALLY Cost You?
Have you ever wondered how much that new cell phone is going to cost you? With so many little charges on your bill, and unknown fees such as activation and cancellation fees, it can become difficult to find out which contract is right for you. Do you sign a 3 year contract and reap the benefits of a discounted phone, or do you buy the phone outright, so as to not worry about cancellation fees? The numbers may surprise you.
Before you purchase a new device, it is good to know the total lifetime cost of that phone. For instance, an Acer Liquid E, purchased in Alberta on a 3 Year Contract with a $50 a month plan, has a lifetime cost of $1,977.87 before taxes. The same, only without a 3 Year Contract (buyout price) for 3 years is $2,352.89 before taxes. The difference is the discounted price of the phone because of the contract signing.
These numbers change, due to Early Termination Fees imposed by the carrier if you choose to break the contract prior to completion. With Rogers Wireless, a wireless company in Canada, the termination fee is the greater of:
i) $100, or
ii) $20 per month remaining in the contract, to a maximum of $400
With Sprint, in the United States, their fees are similar, though much lower:
i) $50, or
ii) $10 per month remaining in the contract, to a maximum of $200
It is important to consider this fee when looking into contracts. If you are in a month-to-month pricing scheme, you do not have to worry about these fees.
Now that you are aware of the cancellation fee, how much will that first month cost? How much will a year cost you? What if you cancel that 3 year contract after a year? Forgetting sales tax due to variation from place to place, here's the different costs based on the following factors:
- Phone bought in Alberta, Canada ( $2.58 Monthly Service Fee)
- Acer Liquid E
- Activation Fee of $35
- Rogers Wireless, with Cancellation Fee structure as posted above
- $50 a month plan
|3 Year Contract||2 Year Contract||1 Year / Monthly|
|Phone Purchase Price||$49.99||$324.99||$424.99|
|First Month Cost||$137.57||$412.57||$512.57|
|1 Year Life Cost w/Cancellation Fee||$1,215.95||$1,290.95||$1,090.95|
|2 Year Life Cost w/Cancellation Fee||$1,646.91||$1,621.91||$1,721.91|
|3 Year Life Cost||$1,977.87||$2,252.87||$2,352.87|
Based on this data, you begin to reap the cost benefits of a 3 year contract as you begin the 3 year of service. The month-to-month is actually cheaper for the first year, but loses the savings as the months continue.
You may be asking "Well, what can I do with this data?" This allows customers to see how the cancellation fees can impact the overall cost of a mobile device, and whether or not you can reap the benefits of signing a contract.
For those of you looking into getting an EVO 4G, here are your numbers, based on:
- $69.99 data plan, + $10 4G Fee
- $36Activation Fee
- Sprint, with Cancellation Fee structure as listed above
|2 Year Contract After Receiving $100 Mail in Rebate||Monthly|
|Phone Purchase Price||$199.99||$449.99|
|First Month Cost||$315.98||$565.98|
|1 Year Life Cost w/Cancellation Fee||$1,315.87||$1,445.87|
|2 Year Life Cost||$2,155.75||$2,405.75|
With the EVO, buying the phone outright is simply not cost effective. Even after the Early Termination Fee, the cost to the consumer is less on a 2 year term than buying the phone outright on a month-to-month plan.
A new phone is great, but it can quickly become a financial burden if you are pressured into a plan that does not fit you. Know what it will truly cost you.
The numbers above will vary from area to area. This is because of different local taxes, cancellation fees, and System Access fees. Consult your mobile phone salesperson if you are unsure of the costs, cancellation fees, and hidden fees such as the System Access Fee. On Rogers Wireless, this fee is now called the Government Regulatory Recovery Fee, and varies from province to province.
Your first month cost consists of the Activation Fee, phone purchase price, and a month of service. Additional fees may exist that are not listed in this article. Local taxes will apply, and were not included in the calculations above. The costs listed above are based on values readily available on the carrier's websites as of June 26 2010. Cancellation fees, monthly plans, and system access fees vary by carrier.