For many years, the two-year contract was king in the US mobile industry. You'd pay $200 to get a shiny new phone, and you'd be stuck for two years. If you broke it or needed to change carriers, you'd have to spend a whole lot more money, and there really were no viable early upgrade options. Contracts also hid the true cost of smartphones, but as no-contract payment plans and early upgrade policies take over, we're faced with a whole new kind of calculation.
How can you get the best deal? Let's check out the current offerings from the big four US carriers and see if we can figure it out.
AT&T is the only carrier that's still fully committed to selling 2-year contract phones, although only AT&T stores can offer them. All the third-party sellers of AT&T devices have to use Next, AT&T's payment plan option. I dare say this is one of the more confusing payment plans offered right now as AT&T has bundled the payment plans and early upgrade stuff into one oddly named package. Note, AT&T will not buy out any payment plans or ETFs you have with other carriers. There's a "buyback" program for your old phone, but it's really not a good deal.
Phones on Next: For your new AT&T Next plan, you pick a phone and the total cost of the device determines how much you'll pay monthly. There are four different versions of AT&T Next. For all of them you own the device and only pay tax (on the full value) at the time of purchase.
Next 24 is divided into 30 monthly payments (I know, it's dumb) and you can upgrade to a new phone after 24 payments (ah, that's where 24 comes from). You also have Next 18 and Next 12 with a total of 24 payments and 20 payments, respectively. They have upgrade options at 18 and 12 months. Finally, there's Next with down payment. This one has a 30% down payment and smaller monthly fees. You can upgrade here after 12 months.
Upgrading: AT&T's upgrading system doesn't seem very fair to me. When you've made the required number of payments (or paid that much in a lump sum), you can trade in your phone and get a new one. The payments start over again and AT&T waves the few remaining payments on the old phone. They're basically buying the device back for almost nothing.
You will pay slightly less for monthly plans on AT&T if you're on Next as opposed to a contract plan.
Plan details: You will pay slightly less for monthly plans on AT&T if you're on Next as opposed to a contract plan. The line access fee is $25 per month for a each line with 5GB of data or less and $15 monthly with 15GB (usually the 10GB tier) or more. There are a few data plan options aside from 5GB and 15GB ranging in price from $20 for 300MB to $375 for 50GB. There is no unlimited option and overages will cost you $15 per 1GB. There is rollover data, though.
Verizon used to have a payment plan called Edge alongside 2-year contracts, but now it has moved entirely to a payment plan system. Everything is different now, so here's how it works.
A single phone plan: Verizon doesn't do ETF buyouts, but it will buy your old phone for "up to" $300 ($200 trade-in plus $100 bill credit). I don't recommend you do that as it's usually a bad deal. Verizon promotes its plans as being very simple, and that's certainly true compared to AT&T's. Each phone is split into 24 monthly payments. You own these devices and have to pay tax on the full value at the time of purchase.
Upgrading: There's no early upgrade option in Verizon's plans. You pay the phone off, then you own it and can finance a new one. You have a maximum of $1000 in device financing per user (max 2 devices), so you can technically get a new device whenever you want as long as you don't hit that ceiling.
Plan details: Verizon has a flat $20 line access fee for each device. Then you pick a data plan to go with it. The basic small, medium, large, and x-large tiers are 1GB ($30), 3GB ($45), 6GB ($60), and 12GB ($80). There are also much more expensive options from 20GB-100GB). All your data is shared across all the lines on your account.
It was just a few years ago when T-Mobile made the decision to bail on contracts, which has since inspired most other carriers to do the same. However, its offerings are weirdly complicated as there are different versions of the no-contract payment plan. Note: T-Mobile will always accept device trade-ins and pay off your existing ETFs and payment plans. That can save you a ton of money, but a device trade-in of some sort is required.
Simple Choice phones: T-Mobile's basic Simple Choice plan means you'll have the total device cost split up over 24 months. You own this device and can finance another one at any time up to the account limit of $1500. You have to pay the full value tax at purchase time. Easy.
JUMP upgrades: T-Mobile's JUMP program is an add-on service for Simple Choice (see above). You pay $10 extra per month to be in the program, and when half of your device is paid off, you can "jump" to a new phone and trade in the old one. You still own these phones, but you're basically trading them in early in exchange for the rest of the cost being forgiven. Payments start over when you upgrade. This is an okay deal if you absolutely need to upgrade your phones often and don't want to deal with selling the old one.
JUMP On Demand upgrades: T-Mobile's other upgrade option is quite a bit different, but still connected to Simple Choice plans. Here, you pay the same monthly rate for your phone as you would with a regular Simple Choice plan (no $10 fee like regular JUMP), but you do not own the device. This is a lease for 18 months. At the end of that, you give the phone back and start a new lease. Why would you do this? Because JUMP On Demand lets you switch phones whenever you fancy, up to three times per year at no cost. So you can use a Galaxy Note 5 for a while, then trade it in for an iPhone 6S Plus in a few months.
Plan details: T-Mobile offers 1GB, 3GB, 5GB, and unlimited LTE plans. There are no overages, but you'll be throttled down to 2G speeds on the capped plans if you go over. T-Mobile also offers data rollover on the 3GB and 5GB plans, unlimited music streaming on all plans, and unlimited (slow) data in 120+ countries at no additional cost. Line access fees are $50 for the first, $30 for the second, and $10 for each additional. The data tiers are individual for each line and the cost varies. On the first line, the tiers are $50, $60, $70, and $80. For the second, they're $30, $40, $50, and $50. For any more, they're $10, $20, $30, and $40.
The nation's smallest carrier (really, that happened) is still offering 2-year contracts right now, but that's supposed to stop in a few months. Like T-Mobile, Sprint will pay off your ETF or payment plans from a different carrier if you want to switch. It also runs a lot of short-term promotions to lure in new subscribers. I'm going to mainly be dissecting the standard Sprint plans that will always be available.
Easy Pay phones: Sprint's standard payment plan splits the device's cost up over 24 months, just like T-Mobile. You own this phone and have to pay tax on the full amount when you purchase.
Lease phones: You also have the option of leasing a phone from Sprint instead of doing Easy Pay. This is actually what Sprint is pushing right now -- the web interface even defaults to it. With this option you pay a few bucks less per month, but you do not own the phone. At the end of the 24 month lease, you either give Sprint the phone back or purchase it for some amount of money. I couldn't figure out how much this would be, even after calling Sprint. They only tell you when you purchase the device (in the lease agreement). The main problem with this is that the difference in price is often very small (as little as $3 per month). That's just not worth it.
Upgrading: Sprint doesn't have an early upgrade option built-into its plans. You can only have one active Easy Pay device per line, so you have to pay it off in full before getting another one. There is, however, a little-publicized $10 early upgrade plan add-on for lease and Easy Pay customers. It's sort of like T-Mobile's JUMP. After you've paid on your device for 12 months with the $10 add-on, you can turn it in and get a new phone (payments start over).
Plan details: Sprint's plan pricing is in a constant state of flux as it tries to find a winning formula. So be aware this section might be rendered obsolete by Sprint at any moment. Unlike other carriers, Sprint lumps the access fee and data bucket into a single line item. The cost is lower for Easy Pay and lease options, which is what we're talking about here. Sprint offers a single line unlimited plan for $60 per month, paid on top of whatever your device cost is each month. It's a good deal for one line. The family pricing relies on shared data buckets from 1GB up to 60GB. Total plan pricing for these is as low as $20 per month for 1GB, but the tier Sprint pushes hardest is 10GB of shared data for $100. Not bad if you're paying $20-30 for each of your devices each month. Sprint is also really not clear about this, but it looks like the limited plans have a $15 per 1GB overage fee.
Early upgrading continues to be a complex situation, and the proliferation of phone leasing options may end up very confusing for some people.
Most carriers have put contracts in the rear-view mirror, and I think that's a fantastic thing. With these new no-contract plans coupled with device payments, you've got much more reasonably priced options. It's also a much more friendly environment in which to use an unlocked phone, like one of the many excellent budget options out there. When you take out the monthly payments, these plans are mega-cheap.
Early upgrading continues to be a complex situation, and the proliferation of phone leasing options may end up very confusing for some people. In a year or two, customers of T-Mobile and Sprint might be surprised to learn they don't own the device they've been using. It all depends on how well it's explained by in-store reps. Even with these potential pitfalls, it's a good time to be a phone nerd.