Whenever we go on the market for a new smartphone, we undeniably end up having to decide between getting it alongside a new phone plan (via something called « zero-dollar-phone » plan) or buying the device alone directly from the manufacturer or a retailer. Once you’ve acquired your new device, you can subscribe to a « Bring-Your-Own-Phone » plan. Obviously, the latter here is a heavier financial commitment. Indeed, the most affordable smartphones costs over $100 and the spectrum expands all the way up to over $1000. Therefore, it can seem like a good deal when you get the device for free within a new phone plan. However, that really depends on the conditions of the deal. In this post, we will look at choosing between Zero-dollar-phone VS Bring-Your-Own-Device (BYOD) contracts when buying a new smartphone.
The « zero-dollar » concept and the various ways of financing a smartphone
First of all, it’s important to define the concept of « zero-dollar-phone ». As the wording says, it implies that you will get your new phone for free. That phone comes with a phone plan sold at a higher price than a plan without a phone (that being a « Bring-Your-Own-Device » plan).
However, as you probably know, nothing in this world is really free. Therefore, you will guess that the premium coming on top of any « zero-dollar » is supposedly paying for the device. Great, that means that it’s just a way to acquire the phone with split payments and you will own it at the end (usually 24 months down the road)! Well, not always. In this article, we’ve covered the different ways for the carriers to provide you with a zero-dollar phone.
Choosing between a Zero-dollar-phone VS Bring-Your-Own-Device (BYOD) contract when you buy a new phone requires good thinking. The knowledge of these tools used by carriers will protect you. It will prevent you from becoming just a redeemable token source of income for the foreseeable 24 months. Now, what will happen exactly if you take this «zero-dollar phone » deal?
Do you pay more for your device while on a « zero-dollar » contract?
To our knowledge, it’s fairly rare nowadays that a carrier applies some kind of interest for the financing of a cellphone within a plan. The exception might be when you have a very low-cost plan, but even then I would argue that. Remember that the goal of every carrier is to have people paying for using their network.
Now, we need to clarify something: you WILL pay more on a monthly basis for a zero-dollar-phone plan versus a BYOD one. But most of the time this additional cost will be just an equal fraction of the cost of the device that you pay over the duration of the contract. Let’s take an example. You sign-up for a zero-dollar-phone plan where the device costs $600 and the contract is for 24 months. This sum of $600 will be split into 24 equal payments ($25) with no extra fee. Each month, the price for the plan will be upraised by this fraction which will pay for the phone. In that regard, when we compare the « zero-dollar-phone » plan to a BYOD plan, the former seems more like some sort of no-interest loan.
Does it make more sense to buy the smartphone outright (Bring-Your-Own-Device)?
It depends on the particular model you are after and the budget you have to acquire it. Today newer smartphones can sometimes cost half the price of a commuter car! It’s a significant budget. If you really want that particular model but your budget is tight, it would make sense to factor the opportunity cost here. Perhaps that money could be better investing in something else when you have settled on a less expensive device.
Also, another thing to have in mind is that today, manufacturers usually reduce production costs by cutting the budget on testing. Therefore early released models are often used to test the market as well as the device itself. When you buy a newer smartphone outright, you might encounter troublesome situations although you have the manufacturer’s warranty. You will still have to deal with the formalities when discrepancies happen. On the other hand, if you are financing/leasing/subsidizing/tabbing this newer device, you will have full support and assistance from your carrier and usually, you will not have to do anything but bring the device back to the store.
Furthermore, you will probably walk out with a new phone or, should you so wish, change for another model!
Does it ever make sense to go on a « Zero Dollar » Phone plan?
There no rules when comparing Zero-dollar-phone VS Bring-Your-Own-Device (BYOD) phone plans. There are no real disadvantages to buy a smartphone outright or have it financed. Despite what you can read on the Internet. It all depends on your lifestyle and your financial situation. In that sense, if you require to change the device every few years, it would not make sense to go on a zero-dollar-phone deal. Not necessarily because you would be paying more for the phone! We have seen that the financing doesn’t apply any interest on the payments. However, If you like changing devices often, you would find yourself on a perpetual Two-years contract. That could be a constrain when life happens. Now if you have a stable situation and a clear vision of what your next 2 years look like, by all means, don’t shut that door of going on financing your next smartphone!
On the contrary, if your situation is changing frequently and you’re still settling in and/or you don’t have a steady income… We would advise indeed to stay clear from the zero-dollar contracts and to look at buying some reliable smartphone outright. Remember that a phone contract is another bill coming in every month. Foregoing its payment could impact your credit score and put your in a difficult position financially.
Finally, you must keep to your budget and not go overstretching just because you are not putting cash outright. You have to know what you can afford and don’t make the excuse that there is nothing to pay at the beginning. Choose a device that you could realistically pay in full with cash outright. There are also occasions when a good discount on a phone-plan means a good rebate on the phone too!
Wrappin’ it up!
That’s it for our reflection on knowing the differences in Zero-dollar-phone VS Bring-Your-Own-Device (BYOD) phone plans. Remember, we think that no one is better than the other and it all depends on your current individual situation. We hope you have found this article useful and thank you for reading.
If you would like to know which device to acquire next, visit our virtual purchase advisor and have a quick chat with our bot. Feel free to browse here for more tips on how to make the most out of your smartphone! We also like comments and to answer questions. So feel free to leave one if you wish!