Is it cheaper to buy a phone full price or with contract?

Question

Hi. I've heard that buying a phone full price(w/o contract) is actually cheaper than buying a phone WITH contract. 

What I've heard is that when you buy the phone at the subsidized, discounted price with contract, there are actually more hidden fees on the monthly payments. So over the 2 years of the contract, you actually pay more for the phone than buying the phone for full price(w/o contract). 

My contract with Tmobile is about to end and I do plan on renewing a 2 year contract. The S4 can be had for 150 with contract, and can be had for about 600 without contract. So if I buy the phone for 600 elsewhere and sign a new 2 year contract with Tmobile, without getting a phone through Tmobile, will the total cost over the 2-year contract be lower? Can someone please shed some light on this? Thank you.

Anonymous · Accepted Answer

Yes it's cheaper to buy it outright at once, but obviously this means laying out a larger amount of cash at the beginning.

It has long been noted by behavioral psychologists that people in general ("idiots") tend to prefer options that involve paying smaller amounts of money over a long period of time, even if this ultimately means they end up paying a lot more money.

Sales organizations have not neglected to exploit this fact

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Is it cheaper to buy a phone full price or with contract?

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