Tuesday September 16, 2014 9:42 am
How to use AT&T Next, Verizon Edge, T-Mobile Jump to your advantage
We've received a few emails over the last few days from readers asking about switching to AT&T Next so that they can get the new iPhone 6 on Friday for no money down. AT&T has been notifying some customers who are mid-contract that they can switch to a Next plan at no charge, doing away with contracts going forward. Of course, there are those who are still under AT&T's grandfathered "unlimited" data plan, but others simply want to know if programs like AT&T Next and Verizon Edge are worth it, or if they're rip-offs. The thing is, early upgrade plans like Next and Edge basically allow you to divorce the act of owning and paying for a phone, from paying for cellular service. If you play your cards right, you'll actually come out ahead financially, and you'll be able to upgrade to a new device whenever you want. Let's walk through a scenario of buying a phone with AT&T Next.
All currently available mainstream plans feature two components: a data charge, and a line charge. We will ignore the data charge aspect from here on out, because it's the same regardless of what plan you choose.
AT&T Next offers you a lower monthly line charge ($15 less for data plans under 10GB, $25 less for 10GB and over) in exchange for them not giving you a large subsidy when you buy your phone. Next plans never involve a contract, and you can get out of them at any time, penalty free, by paying off the balance you owe on your phone.
Apples to Apples Comparison: Keeping a phone for two years
Let's start with the simplest case, and assume you are going to buy a phone and keep it for two years. Whether you save more on a contract or Next here depends on whether or not your data plan is 10GB or higher, as AT&T bumps the line charge from $25 per month down to $15 at that threshold. All examples assume a new base iPhone 6. Here's the cost of acquiring and line charges after two years:
- Next plan, less than 10GB: ~$40 sales tax on new phone + ($25 x 24 line charge) + ($27 x 24 phone payment) = $1288
- 2 Year Contract: $210 for new phone + $30 activation + ($40 line charge x 24) = $1200
- Next plan, 10GB or greater: ~$40 sales tax on new phone + ($15 x 24 line charge) + ($27 x 24 phone payment) = $1048
As we see here, you pay slightly more for a Next plan versus a contract if your data plan is under 10GB. However, that $88 buys you the flexibility to exit the deal at any time you want. If your plan is 10GB or more, you get the best of both worlds, saving about $150 over two years being on Next, plus you retain full freedom to walk away at any time.
So how does Next make AT&T money?
On trade-ins. Next gives you the option, but not the obligation, to trade in the phone after either 12 or 18 months, depending on which payment schedule you choose. Should you choose to do so, you send the phone back to AT&T (it must be in salable condition), and in exchange, they forgive the remaining balance that you owe. However, it often makes more sense to pay off the phone and sell ir yourself.
Example: After month 18 of "Next 18" plan, the amount owed on the iPhone is $27 x 6 remaining months = $162. However, an 18 month old iPhone is worth substantially more than $162. A better option is to pay off the $162 so that you own the phone free and clear, then sell it on your own for something around $350. Then just rinse and repeat with a new phone; as AT&T isn't paying for any of the phone, there's no cool-down period to start over as there is when on contract.
On a new iPhone, a Next plan may be slightly more expensive over two years with a small data plan, or a good deal cheaper with a family sized data plan. Either way, the ability to walk away at any time without penalty by just paying what you owe for the phone is a valuable thing. Trading in the phone leaves money on the table, but if you keep the phone the full two years, or pay it off and sell yourself earlier, there are few downsides to going with the Next plan.
You can check out the early upgrade plans yourself:
- AT&T Next
- T-Mobile Jump (Requires additional $10 monthly payment, which may eliminate savings)
- Verizon Edge
Big thank you to Reddit user ViperRT10Matt for providing all of the information above!
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