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 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:
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.
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.
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.
total cost = $800 + $20 * 24 = $1280
$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.
total cost = $50 * 24 -$35.73 = $1164.27