Let us look at the pricing scheme of the iPhone:
|On-Contract Price||Off-Contract Price||Monthly "Next" Fee||Costs after 12 Months||Overhead from "Next" Fee*|
|iPhone 5 16GB||$199.99||$649.99||$32.50||$390.00||$191.00|
|iPhone 5 32GB||$299.99||$749.99||$37.50||$449.99||$150.00|
|iPhone 5 64GB||$399.99||$849.99||$42.50||$509.99||$110.00|
*This is the On-Contract Price subtracted from the Costs after 12 Months
Notice that the overhead costs become cheaper as the phone's price increases. Essentially, instead of waiting a year for your upgrade, you pay the overhead costs to get it now. I liken this to a layaway for a phone. Over time, you pay a little more than what you would if you bought it at the appropriate time you could pay for it all at once, but, the key difference between the T-Mobile and AT&T plans are there is no down-payment for AT&T.
". Yes, you must pay you respective taxes up front.
So, here are a few things to consider:
- The more expensive the device, the less overhead charge you pay over the next year for the upgrade. If you bought an iPhone 5 at release on-contract, and wanted an iPhone 6/5S, you can wait another year, and pay $199 (or $99 if the iPhone in 2014 has released) up-front, extend your contract, while the iPhone 6 is released. If you do utilize the "Next" program, you will end up paying almost double what you would normally have had you waited the 2 years, unless you opt for a higher-priced device.
- If you decide to get a new device after 12 months, your current device on the "Next" program must be traded in. So, if you break your phone, you are financially responsible for it. Unlike a contract renewal, you just "wait out" your contract duration and then buy a new phone, without worrying about the previous one. This case, you are on the hook for the full, off-contract price of the device if something happens to it before your trade-in period (between 12 and 20 months).
- After 20 months, the phone is yours, and you no longer have a service fee to pay. Essentially, you bought the phone off-contract and paid for it over 20 months. This is especially nice if you just want to wait the normal 2 years for a new device, you can take the money you have been paying for the last 20 months (anywhere from $32 to $42) and save that over the next 4 months, and help pay for a traditional upgrade device (or fully pay for one, depending on your selection).