The scourge of the Old West was the flimflam man, who drove his horse and carriage from town to town and -- with his city-slicker clothes and fast-talking ways -- conned the poor unassuming townsfolk into parting with their hard-earned money for fantastic elixirs and magical amulets.
A case could be made that the major cell carriers have become modern versions of the flimflam man, using slick web interfaces and byzantine terms of service agreements in their quest to separate consumers from their cash. Point in case, the offer to "discount" the price of a new phone, in exchange for signing a two-year contract.
Let's say that you have decided to upgrade to the new 16GB Apple iPhone 6, with Verizon (VZ) as your carrier. That model retails for $649 without a contract but drops to $199 with the contract. This is referred to as subsidizing the cost of the phone, implying that Verizon is eating the extra cost in exchange for your continued business.
A flimflam man would call it "the hook." If you look deeper into the terms and do the math, it turns out the buying the phone outright -– at full retail price without a contract -– is the better move.
Let's Do the Math
First, understand that even if you buy the subsidized version at $199, you still pay sales tax on the full retail value of $649, so there is no advantage there. That means the savings between subsidized and outright purchase is $450. But it is in the contract where the number go south for the consumer.
With a subsidized phone and a two-year contract, the minimum you can pay for Verizon's recommended plan that allows unlimited talk and text and 2GB of data is $90 a month. However, owning your phone outright, you can get that same plan for a single user at $50 a month.
%VIRTUAL-pullquote-But does buying my iPhone 6 means I have to come up with the full price of the phone upfront? %That extra $40 a month times the 24-month length of the contract comes out to $960. Subtract the $450 savings from the subsidized phone, and you are paying $510 extra. And as a bonus, you have no contract obligation, which means you can change carriers anytime you want without paying a penalty, which can run up to $300.
But does buying my iPhone 6 means I have to come up with the full price of the phone upfront? No. Both Verizon and T-Mobile (TMUS) give you the option to finance your phone over the life of the contract at a 0 percent interest rate, with no money down.
In almost all cases, no matter what type of phone you want or what carrier you are with, purchasing the unsubsidized phone makes better financial sense because service plans have come down dramatically in price and -- due to competition -- will continue to do so. And you can find even deeper-discounted plans by going with off-brand names like Cricket, which use the same cellular network as AT&T (T).
The Lund Loop is a free once-weekly curated slice of what I am writing, reading and hearing about in finance, tech, music, pop culture, humor and the good life. But not sports or knitting ... ever!
8 Best Things to Buy in September
Skip the Contract: Buying the iPhone 6 Outright Is a Better Deal
Although summer isn't officially over until Sept. 23, most people consider summer a done deal at the end of August. As such, summer gardening season comes to a screeching halt and seeds, flowers and other gardening goods aren't as popular of a purchase. "Nurseries want to offload their inventory before the official end of summer," explains Tran. "We've seen markdowns ranging from 20 percent to 75 percent off."
The iPhone 6 release date is scheduled for early September, which means several things. First, the older models -- even if they've never been opened -- will instantly lose some of their value as they're deemed "old news." It also means that pre-owned iPhones will hit the used market as consumers trade in their goods for the latest version. According to data by NextWorth, iPhones drastically lose their value six weeks before the new phone launches and hit their lowest price at the time of the launch. This low price remains steady through the end of the year.
If there's one thing we know for certain, it's that denim will never go out of style. It's especially on trend throughout the fall, though, as it keeps you warm, comfortable and fashionable. "Hot tag" prices on denim also serve as a way to get shoppers in the door to buy other cool-weather duds that, most likely, aren't on sale.
Most shoppers have already purchased their new patio furniture, decor and grills for the year. In fact, many are already thinking about putting them into storage, which is why all outdoor furniture, umbrellas, lighting, grilling supplies and similar merchandise is being put on clearance. "Look for markdowns in the 60 percent to 75 percent range as retailers clear room for next season's merchandise," says Charles Tran, founder of CreditDonkey.com. While discounts may deepen as the month goes on, there will be less to choose from, so plan accordingly.
At the beginning of every school year, you can pretty much count on retailers going into panic mode as they realize they have way too many pens, erasers, folders, pencils and other school supplies left over from the back to school rush. Their plan? A sale, of course. Tran says that savings will generally fall into the 25 percent to 75 percent off range for these excess school supplies. Consider stocking up on items you may need throughout the year, or buy items you can use at the beginning of the next school year.
Just as grilling and gardening wane at the beginning of summer, so does bicycle riding. Even if you're not planning to ride a new bike in the coming months, it's a wise investment to make if you foresee yourself needing one for next spring. Expect to find slashed prices on bikes for riders of all ages at both online and local stores.
We're not saying you should run out and buy a car just for the heck of it. That said, if you need a new vehicle, shopping around now is a wise idea. ConsumerReports says that next year's models hit the car lot in late summer through fall, which means 2014 models are appropriately discounted. Make sure you get the best price.
It may seem overkill to plan your Thanksgiving and December holiday adventures in September, but your wallet will thank you for doing so. The best time to buy plane tickets is six to eight weeks in advance for domestic flights, and 11 to 12 weeks in advance for international flights. To ensure you snag a good deal, sign up for price alerts and airline emails on specials and price decreases. In addition to shopping around for your plane tickets, BankRate.com says that "several industry experts recommend booking your car as soon as possible." You can also save money when booking things together, such as a hotel, car and flights.