Total Cost of Ownership: This is What Your Cell Phone Plan Really Costs

Wireless bills can be one of your biggest recurring expenses—and one of the hardest to understand. 

Cell phone carriers tend to be a bit opaque when it comes to promotions, hidden requirements, and fine print. For wireless customers, this can result in fluctuating bills and higher-than-expected costs over the long term. 

That’s why getting a sense of your total cost of ownership (TCO) is important. Simply put, TCO is the total amount you end up paying for your cell phone plan and device over time. Getting to the bottom of the TCO for your own plan and device can be a crucial step to taking control of your finances. 

In this article, we’ve unpacked some of these costs for you—and provided some tips for reducing them—so you can go into your next cell phone plan or device purchase with your eyes open. 

{{takeaways}}

{{trustus}}

Defining Total Cost of Ownership 

Before we continue, here’s the simple equation that’s at the heart of wireless total cost of ownership:

Device cost + (monthly plan cost × contract length) − trade-in value = what you're really paying

This matters because carriers are masters at making you focus on one part of the equation—the deal—while buried the others in fine print. They'll advertise a "free" $1,000 phone, but leave out the part about having to sign up for a premium plan to qualify for it. 

When you calculate the full cost of that plan over time, the “free” phone may end up costing more than simply buying the device with a smaller discount on a cheaper plan.

Why “Free” Phone Deals Aren’t Always the Best Ones

In the market for a new cell phone? Make sure you read the fine print before jumping on a “free” phone deal. It may be that the deal you’re considering will cost you more in the long run than a partially discounted phone deal. 

Why? Free phone deals often come with requirements that can increase your monthly bill significantly. These include: 

• Requiring customers to sign up for an expensive premium plan 
• A long 36-month commitment, with device bill credits spread out over the entire timespan
• Specific phone trade-in requirements 

If you’re already paying for a top-tier, premium plan, that free phone deal may actually be the best one. After all, it will have you moving laterally to another premium plan that won’t hike up your monthly costs. 

However, if you’re on a lower-priced plan—and don’t really need one that includes tons of data and perks—the premium plan requirement that comes with that free phone deal will wind up costing you more in the end. 

Timing Your Upgrade Matters More Than You Think

The way that you time your phone upgrade can have a major impact on how much (or little) you pay for it. 

Holding onto your phone for as long as possible may seem like the responsible move, but it will likely lower its trade-in value when it comes time to upgrade. 

Carriers don't value your old phone based purely on what it's worth. They value it based on whether it fits their current promotional tiers. When a phone ages out of those tiers, its trade-in value can drop by $300–$500 almost overnight—not because anything changed about the phone, but because a new model came out and pushed yours down a category.

These sudden drop-offs are what we call "trade-in cliffs," and they're particularly steep for flagship iPhones and Samsung Galaxy devices. Waiting just one extra year to upgrade past one of these cliffs can wipe out all the money you saved by holding on longer.

Family Plans Can Save Money—Even If You’re Not a Family

Adding lines to your cell phone plan is a great way to save money, bringing down the cost per line significantly. This can result in a much lower total cost of ownership than if you go it alone. 

Just one example: T-Mobile’s premium Experience Beyond plan is $100/month for one line, but comes all the way down to $53.75/month per line when you sign up for four. The same idea holds true for Verizon, AT&T, and Xfinity Mobile plans. 

However, you don’t actually have to be family to get family plan prices. Carriers don’t care whether you sign up for multi-line plans with your friends or your real family—as long as everybody is signed up under one central account.

That means you can gather your buddies, coworkers, roommates, or any other combination of people and tap into family plan savings. 

Switching Carriers Can Save You Money

Wireless promotions are often designed to attract new customers, not reward existing ones. So if you’re willing to jump ship to a new carrier, you may wind up getting a much better deal on a plan and phone than you would were you to stay with your current one. 

New customer deals often include:

• Larger trade-in credits 
• Better phone discounts
• Promotional pricing on cell phone plans 
• Phone contract buyouts

That doesn’t mean switching carriers is always necessary, but it does mean reviewing your plan periodically is important. Sometimes simply moving to a newer plan with the same carrier can reduce your monthly bill—and your total cost of ownership. 

Final Thoughts

Keeping your cell phone plan costs in check can be a challenge, particularly with all of the fine print loopholes and requirements that come along with cell phone plan deals. Getting a sense of your total cost of ownership—and taking heed of some of the tips described above—will help you manage these costs better. 

By considering the full equation—device price, monthly plan costs, trade-in value, and how long you keep your phone—you can spot when a promotion truly saves money and when it doesn’t. Taking a few minutes to evaluate these factors before upgrading or switching plans can ultimately save you hundreds of dollars on your wireless bill.

Ready to start saving? Check out the up-to-the-minute phone deals at Save On Wireless. Unlike the carriers, we show you the actual costs you'll pay, as opposed to simply the advertised prices. This allows you to calculate your total cost of ownership for any given deal or plan, and compare it to offerings from other carriers.