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What Is Total Cost of Ownership for a Phone?
The total cost of ownership, or TCO, is an estimate of all costs you can expect to pay for owning and using a cell phone. Paying attention to this can help you evaluate phone deals and better understand not just what you’re currently paying, but what you might theoretically pay by going with various monthly cell phone offers taking into account device installment plans and monthly service plan fees. This, in turn, can help you make more informed buying decisions.
In this article, we’ll take a closer look at TCO, explain why it matters, and how to calculate it.
How to Calculate Total Cost of Ownership
Total cost of ownership is meant to encompass all of the costs you can expect to pay for owning and using a cell phone. By totaling up all of these operating costs, and direct and indirect costs, you’ll have a much better understanding of the ultimate costs of owning a phone.
TCO calculations can be made by finding and adding up the following costs:
- Smartphone or mobile device purchase
- Monthly cell service costs and fees including taxes, data overages, and more
- Cell phone insurance and repairs
- Phone equipment, accessories, and apps
Once you’ve totaled up all of these costs, you’ll give yourself a realistic idea of what owning your phone translates to financially.
Components of TCO (Total Cost of Ownership)
By calculating the overall cost of different phones and phone plans, you can make a more informed comparison, leading to down-the-line cost savings. Here’s a deeper look at each phone-related expense to include in your own cell phone TCO analysis to give you a better understanding of long-term costs.
Mobile Device Acquisition Cost
Any ownership analysis for a phone starts with the initial purchase price for the device—a.k.a. the acquisition cost.
Major providers like Verizon, T-Mobile, and AT&T often run cell phone deals that include a free cell phone. Pay close attention to these incentives, however, as there will undoubtedly be hidden costs. Most carriers charge an upfront price for your phone, then charge monthly credits mostly equal to the phone’s cost for a set time, usually 24 to 36 months. This locks you in with a given provider for a period of time. Breaking these contracts can result not only in pay off fees, but termination fees.
It’s also important to keep in mind that the typical life span or lifecycle of a phone is 2.5 years. When calculating your TCO, you should plan on paying to replace or upgrade your device every two to three years.
Cell Phone Plans and Fees
Cell phone carriers charge a flat monthly fee for their plans. The average phone bill for one person is $157 per month, but monthly phone prices can range from $15 for basic packages all the way up to $200 for top-of-the-line cell phone plans with premium unlimited data, streaming perks, and other bells and whistles
The main phone plan features that impact monthly cell phone plan costs include:
- Which carrier you go with. Major cell phone service carriers tend to provide more reliable service and coverage, but carry higher prices. Small phone carriers and MVNOs typically offer plans at lower costs.
- Number of lines. Each line on your cell phone plan will add to its cost. However, as you add lines, the price per line typically comes down.
- Amount of data. Cell phone plans with unlimited data tend to cost more. A phone plan with data limits can help lower your monthly costs.
Additional costs that can increase your TCO include late payment fees, and international calling or roaming fees.
Cell Phone Insurance and Repairs
Cell phone repair costs will vary based on your device and the issue being repaired; screen repairs can run $50 up to $350, for example.
Device manufacturers might offer a repair plan or warranty, which charges an upfront fee to cover accidental damage or device defects. Apple’s AppleCare for iPhones starts at $4 monthly, or $79 for two years, and provides low-cost device repair or replacement for accidental damage.
Wireless providers often offer their own cell phone insurance options. T-Mobile’s Protection<360> service is $7 to $25 per month and covers up to five accidental damage, loss, or theft claims over 12 months.
If you decide to enroll in a cell phone repair insurance or support plan, you should include the upfront or monthly costs in your total cost of ownership. If you skip a coverage plan, you can use repair cost estimates instead to calculate your cell phone TCO.
Phone Accessories and Apps
Cell phone accessories, like equipment, apps, and subscriptions, should also be included in the total cost of ownership for a phone. This can also be classified as the costs of operation of your phone.
Common mobile phone accessories can include cell phone cases, screen protectors, charging cables, compatible headphones or speakers, and phone mounts. Some manufacturers like Apple don’t include wall power adapters with their new iPhones, requiring users to purchase them separately. Similarly, Samsung has stopped including chargers with their Samsung Galaxy devices, and Google has done the same with their Google Pixel phones.
The Bottom Line
With so many wireless carriers, mobile devices, and promotions available, it can be hard to tell which phone and plan deals offer the best value based on your needs. Calculating the total cost of ownership is a way to understand how much you’ll pay over the lifetime of your phone and plan.
To help you figure out TCO for different cell phone deals and wireless plans, we always recommend our free and unbiased tools. Try our Plan Finder to quickly search and zero in on the best cell phone plans to meet your criteria—we’ll show you exactly what each plan will cost you, including all the taxes and monthly fees. If you’re in the market for a new cell phone, start with our Phone Deal Finder to easily compare the best phone deals across top wireless carriers. Again, we break down each cell phone offer to make calculating the total cost of ownership easier than ever.
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