Early Upgrade Cell Phone Plans: Are They Worth It?

By Joseph Hanlon

Last updated 10 June 2015

Until recently, it was common to wait until the end of a 2-year contract before having the option to upgrade to a shiny new cell phone to avoid paying a huge penalty. New Early Upgrade programs make it possible for those who want the latest phone to get their hands on them sooner.

But, are they worth it? As you should expect, the wireless carriers aren’t giving away brand new phones, and to take advantage of an Early Upgrade plan you need to be OK with the pros and cons.

Basically, how they work

The major Canadian wireless providers typically sell phones by dividing up payments over the course of a 24-month contract. A phone which costs $750 outright, might cost a customer $250 upfront, with the rest of the purchase price subsidised, or On Tab. Every month you remain a paying customers, your Tab balance decreases until you own the phone at the end of your term.

Early Upgrade plans work by clearing your Tab balance at the halfway point in a two year contract. Provided you give back your existing phone, plus you sign a new contract, your telco will waive all fees and give you a contract clean slate.

The details differ slightly from telco to telco, but broadly, this is how they work:

Existing Early Upgrade plans allow customers to upgrade to a new handset after 12-months.
There is an extra monthly fee associated with these plans — currently between $10 and $30 per month.
Some Early Upgrade plans come with Device Insurance included.
When you upgrade, you sign a new 24-month contract and your telco will waive any existing balance and any new connection fees.
You have to trade-in your current handset in good, working condition.

So, are they worth it?

It really depends on how you feel about phone ownership and how excited you are about getting your hands on a new phone every year. Regardless, it is important to note that Early Upgrade plans are more expensive.

Samsung Galaxy S6 32GB	Example Early Upgrade plan	Example 2-year contract plan
Retail Price	$750	$750
Upfront Cost	$260	$260
Monthly Plan Cost	$90 (including $10 Early Upgrade fee)	$80
Cost after 12-months for plan and phone	$1220	$1100
Total Cost if plan continued for 24-months	$2440	$2200

The reason you pay more is because you continue to pay off the phone, as per a standard contract, plus you pay an extra 'Early Upgrade Payment' on top every month.

Device insurance might also be included for the price of the Early Upgrade program, and may effectively offset the cost of the program, so long as you'd have taken up insurance anyway.

More Like Leasing

The most contentious element in Early Upgrade plans is that you are required to trade-in your current phone before you can upgrade to a newer model. On the one hand this is fair; you’ve only paid for half of it after 12-months after all.

But it does beg the question, what have you been paying for during the first 12-months? You paid the same upfront costs as you would on a normal plan, you been paying down the balance of the phone as a (hidden) component of your monthly bill, and then you hand in the phone and have nothing to show for the money you’ve invested.

Rather than buying a new phone and taking ownership of it over time, this feels more like you have been leasing the phone, only to return it at the end of an agreed 12-month period.

The upside is that you have the option to get a brand new phone and to renew your contract as though the old one didn’t exist. All existing fees are waived and you have the choice to start a new Early Upgrade cycle or not — there is no requirement to renew this element.

There is also an element of convenience to consider. You old phone might be worth money, but only if you can be bother reselling it on eBay or Kijiji. Using an Early Upgrade program gets you the new phone you want without having to reply to a stream of potential buyers or haggling the price.

Like we said before, it really is all about how you view the Pros and Cons.

Phone Freedom image via Shutterstock