It's time to do some math now that Virgin Mobile — a cellphone carrier providing service virtually everywhere in the U.S. — has joined regional provider Cricket in offering iPhones without two-year contracts. Virgin will begin sales June 29.
After getting that seemingly amazing subsidy on a new smartphone, people soon realize that nothing is free. The price is 24 steep monthly payments. But although you don't sign a legal document with Virgin, you are still locked into the carrier for a while before you get your money's worth. [ What are No-Contract Smartphones? ]
So let's compare the contract and no-contract options in detail.
The full price with a contract
Say you get a 16GB iPhone 4S from Sprint (you'll see later why we picked this carrier). That's $200 upfront. Then add a middle-of-the-road monthly calling plan (900 minutes, unlimited text) for $90. But wait, what's this? After you select the plan, the Sprint website says you also need a $10-per-month "Premium Data" plan. So you're paying $100 per month, for a grand total of $2,400 over two years (plus taxes, fees, etc.) [ Smartphone Plans Compared ]
The full price without a contract
Now try Virgin, which is owned by Sprint and actually runs on the same network. You don't get any break on the phone. At $650, it's the same as if you bought it directly from Apple. But you pay a lot less per month. (As with Sprint, you can also buy the basic iPhone 4 at $100 less.)
The closest comparable plan is Virgin's 1,200 minutes and unlimited text for $40 per month (with the $5 discount for setting up monthly autopayments). That saves you $60 each month over a roughly similar Sprint plan. (Though that Sprint plan has fewer minutes, Sprint also provides free night and weekend calling. So let's call it even.)
In about eight months, you will have reached the break-even point with Sprint. So consider it an eight-month contract. (Comparing the cheapest call plans for each carrier, it would take nine months.) Afterward, just as with Sprint, you can continue on a monthly basis or quit and sell the phone online.
If you keep going, however, you will keep saving: $960 over the course of two years.
This isn't an exact science, however. On all its smartphone plans, Sprint also offers unlimited data — versus 2.5 GB per month on Virgin. [ How Much Smartphone Data Do I Need? ]
And with an iPhone 5 expected by October, that iPhone 4 you just bought may be looking pretty old when your Virgin "contract" expires in February 2013. It's probably not an accident that Apple is making its iPhone 4 and iPhone 4S models available on more carriers now that another model is looming. It's trying to clear out inventory before the new one comes out.
Still, if you don't have to own the very latest tech (or simply need to buy before the fall) and you don't consume limitless amounts of data, you can get a very nice smartphone on Virgin — with a virtual eight-month contract and huge savings afterward.