3 ms·

I look at it as a pay now or pay later sort of situation. The charge for my iPhone was low enough that I was willing to get it for $200. I wasn't willing to get

I look at it as a pay now or pay later sort of situation. The charge for my iPhone was low enough that I was willing to get it for $200. I wasn't willing to get it for $800. I love my iPhone but not $800 worth of love. I might pay that back over two years but I'd rather do that than put down $800 for a phone. I'm not even sure that I will pay it back because I am getting service in exchange for staying with AT&T for two years. I feel like I end up breaking even on this deal and if I lose a little then I'll live with it. I just can't put down $800 for an iPhone when I could get an iPad 3G for that.

ZeroGravitas 16y ago
There seems to be some confusion on this in the linked comments too, even though the very first commenter hit the nail on the head, but: You don't need to pay for anything, including phones, up front any longer. Credit is (too) easily available and basically guaranteed to be cheaper and more flexible if you unbundle it from the actual purchase. These disguised loans should really only be attractive to people with low incomes and terrible credit ratings, and they will be taken advantage of because they have no other options. The fact that you seem to be repulsed by the idea of paying amount $X for a phone, but think that paying that exact same sum, plus interest, plus hidden markup is acceptable as long as it's made complicated and so hidden in plain view is mind-boggling to me.
- nijikunai 16y ago
  Though it's very bad for consumers, it's very advantageous for the carriers. By locking you to a particular plan they're making it hard for you to move to another carrier with cheaper plans.
- mcknz 16y ago
  Correct, but convenience is a strong motivating factor -- why else would people pay 20-30% interest just to take their own money out of an ATM? Most people just want to get a phone with service, and don't really want to mess around with the specifics.
- dagw 16y ago
  I was looking at some phones the other day and overheard a customer who agreed to basically pay 15$ more a month for the next two years, just so that they could avoid having to pay $120 up front. That sort of thinking is strange (unless you are a cell phone carrier, in which case it is awesome).
  - pbhjpbhj 16y ago
    So the answer is to extend your credit elsewhere and third the overall costs - which is fine if you have access to an easily extended line of credit. It's not always going to be cheaper for everyone to pay up front but on the whole it does seem better.
    - dagw 16y ago
      If they are so poor that they absolutely cannot scrape together $120 then they really should be buying a $20-30 second hand phone and a pay-as-you-go plan. Committing to $30+ a month in those sort of financial situations is just a really bad idea.
- mzl 16y ago
  While subsidized phones exist in Sweden, the interest is not nearly so bad. In fact, after my 18 month plan is up, I will have paid the same amount for the phone in increased monthly payments as if I had bought it directly. The uptake for the carrier is of course that I am locked into their service for 18 months. The base plan (without the phone payment) is only about $14 per month though for unlimited texts, 500 MiB data, and reasonably cheap phone calls, so I don't mind it.
mgkimsal 16y ago
As another poster just put - credit. We accept the concept of 'buying on credit' for just about every other aspect of our lives, but somehow phones are exempt. We could probably get cars subsidized if we agreed to only purchase gas for a Ford from Mobil stations, and Toyotas could only by gas at BP stations. But why would we accept that? More to the point, if phones/service was truly split up, and the majority of people bought there items separately, there would be more competition to drive phone prices down. Local BestBuy here has a Spring Palm Pre - the older 8gb model - for (IIRC) $99 - but buying it without the 2 year service agreement, the 'suggested retail price' is $749. But it's still locked down - I can't buy it and use it on anything except Sprint, and I can't get any service from Sprint except for a 2 year service agreement anyway (IIRC). What's also interesting is that the 'retail' price of the Pre seems to have gone up over time - last summer I could swear it was $599 or $649. It was $749 checking today. Yes, Sprint may be a bad example here, but the gist is the same. If the voice service plans truly are subsidizing the cheap prices, give me an option to buy a full price phone and get service without the monthly service subsidy built in. My $39 voice plan should be $29 or $24 monthly if I'm not having to subsidize the phone price purchase. In the Pre example, there's ostensibly a $650 'subsidy' for the Palm Pre, but I still can't get a used Pre and set it up with Sprint and get a cheaper 'unsubsidized' service plan. Over 2 years, I should be able to save $27/month without having to subsidize the original phone purchase price. We're not given those options because the status quo is a combination which maximizes profit for the companies and presents the biggest barriers to people switching or canceling service.

ZeroGravitas 16y ago

There seems to be some confusion on this in the linked comments too, even though the very first commenter hit the nail on the head, but: You don't need to pay for anything, including phones, up front any longer. Credit is (too) easily available and basically guaranteed to be cheaper and more flexible if you unbundle it from the actual purchase. These disguised loans should really only be attractive to people with low incomes and terrible credit ratings, and they will be taken advantage of because they have no other options. The fact that you seem to be repulsed by the idea of paying amount $X for a phone, but think that paying that exact same sum, plus interest, plus hidden markup is acceptable as long as it's made complicated and so hidden in plain view is mind-boggling to me.

nijikunai 16y ago
Though it's very bad for consumers, it's very advantageous for the carriers. By locking you to a particular plan they're making it hard for you to move to another carrier with cheaper plans.
mcknz 16y ago
Correct, but convenience is a strong motivating factor -- why else would people pay 20-30% interest just to take their own money out of an ATM? Most people just want to get a phone with service, and don't really want to mess around with the specifics.
dagw 16y ago
I was looking at some phones the other day and overheard a customer who agreed to basically pay 15$ more a month for the next two years, just so that they could avoid having to pay $120 up front. That sort of thinking is strange (unless you are a cell phone carrier, in which case it is awesome).
- pbhjpbhj 16y ago
  So the answer is to extend your credit elsewhere and third the overall costs - which is fine if you have access to an easily extended line of credit. It's not always going to be cheaper for everyone to pay up front but on the whole it does seem better.
  - dagw 16y ago
    If they are so poor that they absolutely cannot scrape together $120 then they really should be buying a $20-30 second hand phone and a pay-as-you-go plan. Committing to $30+ a month in those sort of financial situations is just a really bad idea.
mzl 16y ago
While subsidized phones exist in Sweden, the interest is not nearly so bad. In fact, after my 18 month plan is up, I will have paid the same amount for the phone in increased monthly payments as if I had bought it directly. The uptake for the carrier is of course that I am locked into their service for 18 months. The base plan (without the phone payment) is only about $14 per month though for unlimited texts, 500 MiB data, and reasonably cheap phone calls, so I don't mind it.

mgkimsal 16y ago

As another poster just put - credit. We accept the concept of 'buying on credit' for just about every other aspect of our lives, but somehow phones are exempt. We could probably get cars subsidized if we agreed to only purchase gas for a Ford from Mobil stations, and Toyotas could only by gas at BP stations. But why would we accept that? More to the point, if phones/service was truly split up, and the majority of people bought there items separately, there would be more competition to drive phone prices down. Local BestBuy here has a Spring Palm Pre - the older 8gb model - for (IIRC) $99 - but buying it without the 2 year service agreement, the 'suggested retail price' is $749. But it's still locked down - I can't buy it and use it on anything except Sprint, and I can't get any service from Sprint except for a 2 year service agreement anyway (IIRC). What's also interesting is that the 'retail' price of the Pre seems to have gone up over time - last summer I could swear it was $599 or $649. It was $749 checking today. Yes, Sprint may be a bad example here, but the gist is the same. If the voice service plans truly are subsidizing the cheap prices, give me an option to buy a full price phone and get service without the monthly service subsidy built in. My $39 voice plan should be $29 or $24 monthly if I'm not having to subsidize the phone price purchase. In the Pre example, there's ostensibly a $650 'subsidy' for the Palm Pre, but I still can't get a used Pre and set it up with Sprint and get a cheaper 'unsubsidized' service plan. Over 2 years, I should be able to save $27/month without having to subsidize the original phone purchase price. We're not given those options because the status quo is a combination which maximizes profit for the companies and presents the biggest barriers to people switching or canceling service.