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Re-activateThere are several ways to buy a smart phone these days. You can sign a traditional two-year contract and get a phone such as the Apple iPhone 5c (16GB) for $0 or for $100 up front, then pay back the subsidy that made the phone so cheap over the life of your contract. Or you can pay the phone's full price of $550 up front, with no contract. Major carriers now also let you pay a small fee up front, then pay off the phone in installments. We found the cheapest plan possible for each major carrier's contract and contract-free plans, and calculated the total cost of ownership (phone, plan, and any sign-up fees—but not taxes) over two years. Then we added an additional six months to show what happens if—heaven forbid—you decide to keep your phone.
Two-year contracts aren't such a bad deal if you plan to upgrade your phone after the contract expires.
Contracts get pricey if you hang on to your phone because carriers continue to charge the same monthly service rates after the phone has been paid off.
T-Mobile separates the price of the phone from the price of service. Once your phone is paid off, you just pay for service.
Verizon and AT&T sell no-contract phones but don't discount the monthly service price. You'll pay the same every month as you would if you got a subsidized phone.
Source: Carrier website data analyzed by Consumer Reports.
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