Are Smartphones The New Cars?

Nowadays, it’s almost impossible to find someone who doesn’t own a smartphone. We use them in many aspects of our lives and they make things much easier for us. But like all consumer goods, we tend to make poor choices when it comes to how we acquire them. Smartphones have now become kind of a status symbol in a way that looks an awful lot like cars.

In this post, I will discuss how smartphones are becoming the new cars. Please keep in mind though that I myself love smartphones and can’t imagine life without one. I just think that just like with cars, we need to be smart (pun intended) when we buy one. With prices flirting with the $800 mark, there is no question that a smartphone is a major purchase.

We finance our smartphones

The two most popular brands (Apple’s iPhone and Samsung’s Galaxy) usually sell for at least $500 on the first year of release. Depending on the model, prices can climb up to the $800 range.

When we buy a phone, we don’t feel like we are spending this much. The real cost is hidden in subsidies offered by providers. A $300 phone sounds reasonable, even if we’re paying $80 a month to keep it.

We forget what we need smartphones for

Phones serve three (3) main purposes: voice, text and data. Television commercials and keynote speeches may claim otherwise, but this is all we need our phones for. That doesn’t keep manufacturers from coming out with new models every single year. But ask yourself this: how many of these new releases actually introduced a major improvement in one of the three elements?

We are now starting to lease phones

Thanks to a new type of agreements from the major wireless networks, it’s now even easier for people to overspend on their phone. Instead of the standard “discount” offered at contract signing, customers are now encouraged to enroll in zero down plans. Just like car leases, they are able to trade in their phone way before they need to so they can always have the latest device.

Paying one phone with a monthly installment plan over two or three years is technically the same as buying it up front. Most of these plans are zero interest. It’s even better if the user keeps the phone for a few more years after that since a two year old phone is perfectly fine if it’s treated carefully.

The problem is that every single year, people that can barely afford paying rent are upgrading to the next best thing. They are signing up for a lifetime of payments by renewing their agreement whenever there’s a new phone out.

Related post:  Money Mistakes Smart People Make

We’re willing to get phones at their most expensive price

Although depreciation works differently in smartphones than it does in cars, it still exists. Phones become a lot cheaper when a new model gets released. They also cost less if they’re refurbished. But we still spend hours and even days in line every year to get our hands on the iPhone x or Galaxy Sx before our friends do.

Bottom Line

If you’re debt free, have a solid emergency fund and are saving aggressively towards retirement, then by all means get as many smartphones as you want.

Unfortunately, many americans frankly should think twice before upgrading as often. They simply don’t have the money! I’ve been guilty of getting a new one every other year, and I literally just became debt free last week.

Phones are fun and useful, and in a perfect world, everybody should be able to afford the latest and greatest. They may be expensive, but big picture wise (as the ratio of a an average salary), they don’t cost that much. Unfortunately, many of us are in such bad financial shape that even “small” luxuries become dangerous.

Here are some tips on how to save money while enjoying the many benefits of smartphones:

  • Always buy the previous model since it’s still fairly recent and has a nice price reduction. Also consider buying refurbished.
  • Keep phones for as long as possible.
  • Wait a few weeks before making major software upgrades. Sometimes the new versions have bugs that are especially mean to older phones (I wonder why).
  • Try to buy an unlocked phone. This insures you actually can afford the phone by forcing you to save and pay cash for it. In addition, you have the freedom to pick any network that would be able to support it, which can create savings in your monthly bill.
  • Ignore the “cool” factor and only pay for features you’re actually gonna use in your daily life.
What up?! I go by Mr. Compounding (I know, great name). I grew up in Port-au-Prince, Haiti and moved to Boston after high school. My goal is to share my personal experiences and opinions, as well as encourage people to take control of their finances.

6 thoughts on “Are Smartphones The New Cars?

  1. You’ve read my mind!
    I’m typing this comment on a used, hand-me-down, free iPhone 5. I view phones exactly as I view cars – utilitarian objects that have no bearing on my status or self-worth. That’s why i drive a 14 year old car and use this “dinosaur” of a phone. I’m never going to let being an early adopter affect my financial well being!

  2. All in all I agree with what you wrote, great tips in there. I work in tech though so I thought I’d chime in on a few bits:

    “Phones serve three (3) main purposes: voice, text and data…”
    This feels like a bit of an oversimplification. Smartphones aren’t just “phones” anymore even if they’ve retained the “phone” moniker, they’re really computers that can also take calls. Conflating the 2 is a bit outdated. This is an ever increasingly mobile-first world, and for many a mobile-only world.

    “Wait a few weeks before making major software upgrades. Sometimes the new versions have bugs that are especially mean to older phones (I wonder why).”
    On the flip-side of this, waiting also exposes you unnecessarily to potentially devastating security exploits. This is the reason vanilla Android pushes updates so aggressively.

    “Keep phones for as long as possible.”
    Just keep in mind the end-of-life policy.

    Totally agree with the other points, there’s definitely a premium to be paid for the latest and greatest, and for many they really don’t need it.

    1. Great points.

      I totally agree that phones are now being used as computer, which is what I mean by “data”.

      Waiting too long to update phones certainly has its risks, but I usually still give it a couple weeks or so. I know a lot of people whose phones got a lot less functional after updating their software, so I just look around and check that the transition is smooth for the phone I have before I install anything.

      By “as long as possible”, I mean 3 or 4 years as opposed to 1. I personally buy my phones to use them for their entire life span and if I can sell them, great, but if no one’s willing to pay anything when it comes time to get a new one, I’m fine with it.

      Thanks for sharing!

  3. Awesome tips! It is crazy how the cost of cell phones have skyrocketed (or they appear as much since the cell phone companies aren’t providing the same subsidies they once did).

    I have had success buying refurbished phones in the past. In addition, I try to sell my old phone on ebay.

    1. Reselling is a great idea! Unfortunately I have a long history of breaking my phones especially in my younger and careless years, so I never have anything worth buying but I will definitely try that when I get my next phone.

Leave a Reply

Your email address will not be published. Required fields are marked *