Price Check: Droid with 1yr, 2yr or no contract

| Published: November 5, 2009

Mobile Content Today posted an interesting breakdown today. Writer Todd Ogasawara ponders, not whether to get the Moto DROID, but how to get it: At the discount price (with two-year contract), partial discount (for a one-year contract) or full price (no contract at all). I know some of you guys might be wondering the same thing, so here’s a summary of what Mr. Ogasawara came up with:

The choices:

  1. $200 price (after a $100 mail-in rebate) with a two-year contract
  2. $270 (after a $100 MIR) with a one-year contract
  3. $560 at full retail price with no contract restrictions

(The last two bits of info come courtesy of Verizon's @DroidDoes Twitter account)

Using a minimum $70/month plan price as a baseline, the breakdown works out thusly.

After two years of service:
$200 (subsidized phone with 2-yr contract) + monthly fees = $1,880
$560 (full price phone, no contract) + monthly fees = $2,240

After one year of service:
$200 (subsidized phone with 2-yr contract) +  monthly fees + $350 ETF (early termination fee) = $1,390
$270 (partially discounted phone with 1-yr contract) + monthly fees = $1,110
$560 (full priced phone, no contract) + monthly fees = $1,400

After 6 months of service:
$200 (subsidized phone with 2-yr contract) + monthly fees + $350 ETF = $970
$560 (full priced phone, no contract) + monthly fees = $980

In each case, the subsidized phone (for the designated time length) is the most affordable way to go — except in the last scenario. There’s no subsidy or contract for six months, so the comparison pits a full price DROID against a fully subsidized one. Turns out, even with the ETF, it’s still less expensive to get the handset via two-year contract and then dump it six months later. Too bad it’s only a $10 savings, though.

Or is it?

The analysis contains a flaw: Mr. Ogasawara didn’t take into account that the ETF gets prorated down (by $10) for each month of service completed. So if a user got a fully subsidized phone, then broke the two-year contract after half a year, that would make the fee $290 and put the total amount spent at $910.

In other words, the total cost savings would actually be $70.

What’s the moral of the story? If you’re planning to use a no-contract Droid for at least six months, don’t. Instead, get the contract and pay the fee. Then when you’re done with it, you can sell it and kick the extra cash toward the next hot device you’re drooling over.

Via: Mobile Content Today



UPDATE: A buddy pointed out to me one important fact: The $350 ETF price hike isn't expected to go into effect until November 15th. That means the current fee ($175, with $5 prorated per month) is still in effect for now. So if you grab this phone within the week, the numbers would look different. How much? This is the new six-month analysis:

$200 (subsidized phone with 2-yr contract) + monthly fees + $145 ETF (175 minus six month prorate) = $765
$560 (full priced phone, no contract) + monthly fees = $980

That's a difference of $215, which is enough for a whole new smartphone. So the lesson here is twofold: (1) Math is your friend. (2) If you want to maximize your bucks and are planning to use the DROID for six months, DO NOT WAIT TO NAB THIS.

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