Phone Upgrades: Consumer Data Shows Savings in Waiting

Kevin Brasler, executive editor of Washington Consumers’ Checkbook, stated that consumers frequently upgrade their mobile devices at a financial loss. He noted that the major U.S. carriers structure plans to keep customers in a cycle of financing rather than ownership. This approach mirrors a leasing model where the phone is returned before it is fully paid off.

Brasler pointed out that AT&T, Verizon, and T-Mobile all offer annual upgrade programs. These plans allow customers to trade in their current device for a new one after paying a specific percentage of the original cost. The expert described this as a strategy to convince buyers to accept new models that often cost more than $1,000. Customers then spend two or three years paying for that new device while simultaneously paying for the previous one.

The consumer group argues that the value of annual technological changes has diminished over time. Brasler observed that it has been approximately 20 years since the first iPhone launched. During this period, yearly improvements have become increasingly small. He said the changes are often not noticeable to the average user. Consequently, the upgrades do not justify the high price tag of a new handset.

A financial comparison illustrates the cost of frequent upgrades. If a buyer purchases a $1,000 phone and keeps it in good condition for one year, the device retains a private resale value between $500 and $700. Under a carrier upgrade plan, the customer pays down a portion of that $1,000 in the first year and then surrenders the phone. This process repeats annually. After three years of continuous upgrades, the customer has paid for service and financing throughout the period. However, they have never possessed a fully paid-off device that they could keep or sell for cash.

In contrast, a customer who holds a phone for three years completes the financing term. The device becomes fully paid off. The owner retains physical possession of the unit. At that point, the phone may still have a resale value of a few hundred dollars. Brasler recommended that consumers keep their devices for at least two, three, or four years. This strategy stops the continuous payment for new hardware.

The three major carriers continue to market these annual upgrade options. Each carrier’s specific terms vary slightly in how they calculate the trade-in value. Despite these differences, the core mechanism remains consistent. Customers trade in a partially paid device for a new model. Brasler said this structure prevents buyers from selling their used phones in the open market. The result is a lower return on investment for the consumer compared to holding the device until the loan is cleared.