Consumer Advice: Keep Your Phone

Kevin Brasler, executive editor of Washington Consumers' Checkbook, advises American cell phone users to stop upgrading their devices every year. Brasler argues that the annual release cycles from major manufacturers offer marginal improvements that do not justify the financial cost of constant replacement.

The three major U.S. carriers, AT&T, Verizon, and T-Mobile, all market annual upgrade programs. Under these plans, customers pay off a portion of their current device's cost each month. Once a specific payment threshold is reached, the customer can trade in the old phone for the newest model. Brasler describes this structure as similar to a lease, preventing users from selling their used hardware at private market rates.

"They really try to convince people through 'free phone offers' or upgrade offers from the phone carriers, but what happens is people end up paying for two or three years on that new phone that costs a thousand dollars or more," Brasler said.

Brasler notes that technical advancements in smartphones have slowed dramatically since the first iPhone launched in 2007. "Each year they come out with a new model, they’re small improvements, and not going to be noticeable, necessarily," he said. He added that these minor changes are rarely worth the $1,000 or more price tag of a new device.

A simplified financial comparison illustrates the difference in value between private resale and carrier upgrades. If a consumer buys a phone for $1,000 and keeps it in good condition for one year, they can sell or trade it privately for between $500 and $700. In contrast, a customer using a carrier's annual upgrade plan pays off a large portion of that $1,000 cost in the first year and returns the device to the carrier.

If a consumer repeats this process for three years, they continuously pay for service and financing but never possess a fully paid-off device to keep or sell. Conversely, holding onto a phone for three years results in a fully owned asset that can be sold for several hundred dollars. Brasler recommends keeping a phone for at least two, three, or even four years to avoid constant financing.

"You’re usually far better off to keep the phone for at least two, three, or even four years," Brasler said. "That way you’re not paying on a new phone all the time."