Pay Cash Or Lease Your Next Cell Phone?

Have you ever tried to figure out what you should do with your cell phone? Pay for it in cash? Get another 2-year contract? Get into something called a Next or Edge plan? What’s the best way to get a phone and sign up for cell service with the best value?

Notice the Word, “Value”

A phone, much like your car, is an important tool. In fact, it’s the tool you use the most in your daily life. The average person checks their phone 46 times every day or 33,580 times over 2 years. You can find cheap phones with cheap plans but if there was ever anything to spend a little more on for a reliable experience, this would be it. That doesn’t give you license to go overboard, though.

The Phone

The days of the 2-year contract are pretty much gone. You can buy the phone outright or lease. Every company has its own set of complicated lease plans but here’s what I found on an iPhone 6S retailing for $649.99. Each of these is for a 24-month lease and required you to pay the sales tax upfront:

AT&T Next 24 Plan: $32.50 per month

Verizon Edge: $27.08 per month

Apple: $32 per month

What does this tell you? Add it up and you’re paying $130 extra for the phone with Apple and AT&T and the retail cost of the phone with Verizon. Verizon has a great deal. It’s basically interest free.

All of the plans basically work the same way. You have the option of turning in the phone and getting the newest one after 12 months depending on the plan you’re on but that means you paid on a phone you don’t get to keep. Not a great idea from a personal finance perspective.

If you make all of the payments, the phone is yours. You can keep using it, (great idea) or you can sell it. If you sold it, you could get about $200 for it on or some other site like it. There are other, cheaper plans outside of the big players but you’ll find a variety of opinions that might make you uneasy about using Cricket, StraightTalk, or others.

Pay Cash for the Phone

But what about skipping these lease plans and just buying the phone outright? The rules of responsible personal finance say that you shouldn’t be in debt to anybody. That’s a great plan to live by. And if you can’t afford to pay for the phone in cash, you probably shouldn’t have it. You could save up and buy it instead of using dollars you don’t currently have. Betting on your future ability to pay something is asking for trouble.

There are plenty of reasons why this is a good idea. Unlocked phones allow you to go anywhere you want for service. You can change any time you would like. And you own the phone so you can sell it and put the money toward buying the next one.

But if you’re not the type of person that likes the hassle of selling your used stuff, Verizon’s lease plans look pretty good. With Apple you also get Applecare as part of the package.

The Verdict

Most people in the know will tell you that if you like to have the latest and greatest phone, go with one of the lease plans. You’ll make a lot of payments and never own the phone but it probably makes the most sense. But Consumer Reports backs up what I’m seeing. The best way to save money on a phone is to buy it, keep it well beyond the two years, and later sell it.


The advancements are so incremental that you could easily wait two years or even a lot longer before upgrading your phone. If you buy it outright, pay it off, and enjoy at least one year where you’re not paying for a phone, you’ll save $384. Keep your phone for 4 years, you’ve saved $768—enough money to buy a new phone and have money left over. You could also purchase a model year older than the current one or buy a used phone if you’re a little braver. And don’t forget that the phone you paid cash for could be perfect for a child that reaches cell phone age.

Let me be blunt one more time: IF YOU’RE HONEST ABOUT YOUR FINANCES, YOU PROBABLY CAN’T AFFORD THE NEWEST PHONES. Statistics show that to be true.

I know that the techie people like me are going to consider it some cruel form of torture to use a phone for 4 years but buying an unlocked phone that allows you to take advantage of different carriers as other money saving plans come to market is a big advantage. To be fair, the lease plans allow for early payoff. That gives you some options too.

Bottom Line

Remember that whole 46 times per day thing? That, in my opinion, gives you the right to spend a little more to get a quality product, especially if you use it as part of your job or business but let’s pay cash. In most countries around the world, people buy their phones. There are no complicated lease plans.

And finally, figuring all of this out is no easy task. If you’re in the cell phone industry, please reply below and give us the inside scoop.

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