Cell Phone Plan Calculator

Created by Bogna Szyk
Last updated: Jul 26, 2019

The sheer number of phone-buying options available at every carrier is enough to make your head spin. Should you get a traditional two-year contract with a new phone? Maybe you should get it subsidized, with a solid discount? Or perhaps the most profitable option is to buy your dream model at Amazon? With our cell phone plan calculator, you will never have to guess again: you will know.

This tool allows you to compare two cell phone plans. All you have to do is ask your carrier for some numbers (or look them up on their website) and plug them into this cell phone calculator to get a direct answer to the question:

Which phone-buying plan is cheaper and by how much?

The costs of buying a phone outright

The first step is estimating what will be the total expenses for your phone if you choose to buy it at Amazon or at Walmart. To find it out, you need three values:

  • Contract duration. Technically, you will not sign any contract with the carrier if you'll be using pre-paid cards. Treat this value as the number of months after which you are likely to replace your phone. Most of us change our phones after about two years, but if you buy a new model each year or stick to the old one for longer, feel free to change this number as you wish.
  • Phone price. This figure should be as close to reality as possible; it is the retail price at which you will purchase your new phone. If you plan to get a used one for a lower price or get your phone from a different continent at a high shipping cost, you should include all of these discounts or extra costs here.
  • Monthly bill. The monthly expenses on your cell phone bill.

Once you know all of these values, the total expenses on your cell phone (provided you buy it outright) can be expressed by the following equation:

total cost = phone price + monthly bill * contract duration

Our mobile calculator will determine this value automatically. These are all planned expenses on your phone you will bear until you decide to replace your phone.

The costs of getting a phone-buying carrier plan

In order to calculate how much you will pay altogether if you choose a carrier plan, you need one additional value: the monthly bill you will pay per each month of the contract. This value should be higher than the monthly bill in the previous scenario - after all, it includes the monthly installment for your phone as well.

The easiest way to calculate the total expenses would be to use the following formula:

total cost = monthly bill * contract duration

We decided to go one step further in these calculations. After all, you don't spend all of this money straight away. The sum you would otherwise spend on the cell phone on the first day of your contract can be put into a savings account. Every penny you will invest that way will generate some interest, according to the bank's interest rate.

Our cell phone plan assumes the following behavior on your side:

  • You transfer a certain sum of money to a savings account at the very beginning of the contract. This amount is equal to the price you'd pay if you bought the phone outright.

  • The interest is compounded once a month.

  • Every month, you withdraw a certain sum from your savings account. This amount covers the difference between the monthly bills in variants 1 (buying the phone outright) and 2 (getting a carrier plan).

  • The maximum withdrawal you can make per month is the price of the phone divided by the contract duration. This ensures that you will not run out of money on your account until the end of the phone contract.

  • The cell phone plan calculator finds out how much compounded interest will be generated on your account throughout the contract - in other words, how much additional money you'll make. Then, you can include these savings in the total expenses as follows:

total cost = monthly bill * contract duration - savings

At the end of the calculations, our calculator compares the total costs of two variants and tells you which one is more profitable in your case.

Cell phone plan comparison: an example

If the rules above are a bit unclear, we'll show you an example that should dispel any doubts. Let's take it step by step.

  1. Find your dream cell phone model. Note down its retail price - let's assume it's $800.
  2. Go to your carrier's website. Check how long the contracts are. We can assume it's 24 months.
  3. Check what is the monthly installment if you were to get the phone on a carrier plan. Let's say that if you pay $50 a month for the next 24 months, you will get your phone for free.
  4. Check the pricing plan for customers who use their own phones. Let's say it's $20 per month.
  5. Go to your bank's website and check the interest rate on a savings account. We can say it's 4%.
  6. Now, we can start calculating! The first thing is the total cost if you would buy the phone outright:

total cost = $800 + $20 * 24 = $1280

  1. The next thing you have to do is to find out what is the difference between the monthly bills in two variants. $50 - $20 = $30. It means that if you get a carrier phone-buying plan, you will deposit $800 into your savings account, and withdraw $30 each month to account for this difference.
  2. The cell phone calculator will automatically calculate the interest generated on your account. In this case, it's $35.73.
  3. The last step is to calculate the total costs of carrier plan:

total cost = $50 * 24 -$35.73 = $1164.27

  1. The carrier plan is actually cheaper! In this case, choosing the second variant will save you almost $116 in the long run.
Bogna Szyk
Contract duration
Interest rate
Buying a phone outright
Phone price
Monthly bill
Total cost
On a carrier phone-buying plan
Monthly bill
Interest from investing
Total cost
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