Doing the Math for T-Mobile's JUMP Phone Upgrade Plan

By Norman Chan

$10 a month for the ability to upgrade at subsidized prices.

If you're the type of person who upgrades phones at least once a year, T-Mobile has just announced a new phone upgrade plan that may work for you. This isn't a cellular service plan or contract. For $10/month, JUMP is simply a plan that lets you buy new phones at subsidized (ie. on-contract) prices twice a year. It's kind of similar to a car lease, in that you still have make a down payment (eg. $200 per iPhone) and you have to trade in that phone when you want to make your next upgrade. JUMP also includes insurance against damage, loss, or theft, which currently costs $8 a month.

Photo credit: Flickr user alper via Creative Commons.

Let's do the math on JUMP to see if it makes sense.

Let's say you're on contract with AT&T or Verizon (remember, T-Mobile has done away with contracts), and upgrade your phone once every two years. That subsided price for an iPhone (16GB) is $200, while the full unlocked price is $650, netting a $450 difference. Amortized over two years/24 months, that's $18.75 a month you're paying in that monthly contract toward that subsidy. But you're also likely able to sell your existing phone and get some money for it too. The going Amazon trade-in price for an iPhone 4S--which is about two years old--is $285. So when you factor that in, your net monthly "upgrade" contribution is really only $6.87. That's less than T-Mobile's JUMP subscription service. But you're also likely paying a lot more per month while on an AT&T or Verizon contract.

If you upgrade once a year, though, the numbers change a lot. Neither AT&T and Verizon have broad mid-contract upgrades policies, but it varies case to case. For an iPhone, for example, AT&T will let subscribers do a mid-contract upgrade for an additional $250 dollars + $18 upgrade fee on top of the full subsidized price. That means the $650 iPhone costs $468 mid-contract, for a savings of $182 per year. And since your existing phone is only one-year old at that point, you are likely to get more for it than a two-year-old phone. But even assuming a trade-in price of $285 for your old phone, that's essentially the same $200 subsidized price as new customers ($468 out the door minus $285 trade-in value equals $183 net cost). But then you're also stuck on a new two-year contract with AT&T or Verizon.

But if you upgrade a phone twice a year, JUMP starts to be more attractive. JUMP kicks in after you've been on the subscription for six months, so you're effectively paying $60 + the subsidized phone price every time you upgrade ($100 for iPhone 5 on T-Mobile) + the monthly installment for that phone ($20/month for a standard 24 months). For every new $650 iPhone, that's $60 + $100 + $120 = $280 total cost to lease the phone for six months. For two leased phones in a full year, that's $560 + the remaining installment payments ($20 x 18 remaining months = $360), or $920 to upgrade twice in one year and keep that second phone.

Bottom line, the math is complicated, and you really have to figure out your existing upgrade schedule to see if this makes sense for you.