Are Early Phone Upgrades Worth the “Jump”?

T-Mobile, notoriously known for having bad service in Southern California, has come up with a new program meant to shake up the cell phone industry as we know it. See excerpts from the article below:

Their new “Jump” plan means T-Mobile customers can get a new phone with no up-front charge and pay off the value in installment payments over the next 24 months. An iPhone 5, for example, adds $27 a month.

In return for the ability to get a new phone as often as twice a year, customers also have to pay an extra fee of $10/month (though that also provides insurance coverage).

T-Mobile offers monthly service plans that cost less than the competition, even after including the separate installment payments for a phone, but the new fee complicates the analysis for anyone trying to compare deals.

To get a new phone, customers reset the clock on their two-year monthly installment plan and turn in their old phone — in effect giving the residual value back to T-Mobile. That remaining value can be pretty hefty – a basic model iPhone 5 sells for over $400 on eBay. Gazelle.com will pay $300 outright for it.

So for an extra $10 a month you can secure your new future phone, but you lose the ability to cash in your phone, which is probably less than a year old under this new plan.

A typical Jump subscriber who starts with an iPhone and gets a new one after 12 months will have paid $2,328. They are also on the hook for another year of iPhone payments totaling $324. If they switch carriers or cancel the service, that remaining balance is due immediately.

But if they didn’t join Jump and just bought a new iPhone after 12 months for the full price $648, they will have paid $2,736. Plus they could sell the old iPhone and recoup much of the difference. And they are not on the hook for any more payments.

There are huge savings for those buying a new phone every six months – more than $1,000 — but the iPhone only comes out once a year. Including the residual value of the three phones turned in plus the continuing obligation to pay for the latest phone, even the earlier adopter might not be better off.

AT&T and Verizon have come up with similar plans for those too anxious to wait 2+ years to get a new phone. In the end, the plans available now for people who want to switch phones every six months are probably not worth it financially.

I think people would prefer to change phones once a year. That’s usually when I begin to tire of my phone, or become so distracted by the shiny new technology (what, there’s a WATERPROOF ONE! I would TOTALLY use that once a year!) that they can’t wait any longer. You could always go the Ebay route and buy an unattached phone and take it to your provider and tell them to switch everything over. However, the potential of the phone breaking and not having a warranty and not being “provider-approved” is great enough to scare most people off.

What do you think would be the best way to upgrade cell phones? Do most people really need a new phone every 6 months? Is it worth the price to get the latest technology? Do you have any experience with these new short-term cell phone upgrade plans?

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