This is true, but mobile contracts are much murkier than mortgages, and this is by design of the phone companies.
Consider how much different things would be if people had month-to-month service contracts and they financed their phone upgrades separately (though the payments were rolled together). Imagine if people could just pay off their device debt, cancel their contract, and move to a new carrier. Or imagine if people could pay off their device debt in advance to avoid the interest payments. Or imagine if people could roll their old device debt into a new loan for a new device, and then carry that forward. It's funny how a phone company will give you $500 in financing for a new phone no problem but they outright refuse to give you $550 or $600.
I imagine most consumers would probably prefer a more transparent system like this, but the problem is that then they would see how much they are getting shafted. People are locking themselves in to $2k commitments when in reality they should only be committed to $500. Sure there's also service attached but a lot of people don't use a lot of cell data or make many phone calls. Most people could probably get buy on the cheapest virgin mobile plan, for example, which is just $35/mo.
So let's do the math. People who are locked into phone contracts due to their device upgrades are locked into about $1150 of extra payments. That works out to an effective APR right around 99.8%!
It's no wonder that phone companies like things the way they are, confusing and complicated. It allows them to charge usurious interest rates on device purchases without their customers fully realizing.
You know there are enough options in the market for what you are looking for. Why are you not exercising your options?
This is at the of the US market conundrum. There are enough options for people not to go for the big two. They cost more money, they give less freedom and still people flock to them. I just don't get it.
Consider how much different things would be if people had month-to-month service contracts and they financed their phone upgrades separately (though the payments were rolled together). Imagine if people could just pay off their device debt, cancel their contract, and move to a new carrier. Or imagine if people could pay off their device debt in advance to avoid the interest payments. Or imagine if people could roll their old device debt into a new loan for a new device, and then carry that forward. It's funny how a phone company will give you $500 in financing for a new phone no problem but they outright refuse to give you $550 or $600.
I imagine most consumers would probably prefer a more transparent system like this, but the problem is that then they would see how much they are getting shafted. People are locking themselves in to $2k commitments when in reality they should only be committed to $500. Sure there's also service attached but a lot of people don't use a lot of cell data or make many phone calls. Most people could probably get buy on the cheapest virgin mobile plan, for example, which is just $35/mo.
So let's do the math. People who are locked into phone contracts due to their device upgrades are locked into about $1150 of extra payments. That works out to an effective APR right around 99.8%!
It's no wonder that phone companies like things the way they are, confusing and complicated. It allows them to charge usurious interest rates on device purchases without their customers fully realizing.