When small business owner Kevin Schimelfenig finally examined his smartphone bills, he was shocked to find he was paying 25% more for his indispensible BlackBerry Storm—he uses it to email, text and call clients all day long—than the price he was quoted for the plan. Schimelfenig, founder of a medical-device marketing firm in Cary, N.C., says the extra fees totaled $1,400 over the last three years.
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Buying everything from small gadgets to cars seems to be getting cheaper these days, but owning them isn't. Taxes and fees on cell phone plans, installation and repair costs on home appliances, and hefty financing fees on cars can now add up to more than 50% of the sticker price of the purchase, according to estimates from experts and data analyzed by SmartMoney.com. And the costs are rising, says Linda Sherry, of consumer advocacy group Consumer Action: Taxes are going up, consumers are keeping appliances and cars longer — and paying more for repairs and poor efficiency. "The result is a real budget buster," she says.
In all of these niggling little ways, consumers keep paying for things, long after they've ostensibly bought them. Buyers rarely take into account these financial ripple effects, which can add up to thousands of additional dollars, says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group. For example, over the course of a two-year service contract, smart phone owners may spend an additional $1,000 on taxes, fees, roaming charges, and meatier data plans—all add-ons that are rarely considered when the contract is signed.
This steady drip of ongoing costs isn't stopping soon. Cell phone users pay about 15% in taxes and fees, on top of the base cost of their plan and usage, up about 2% this year and expected to rise again next year, according to the CTIA-The Wireless Association, a trade group. The average cost of a smartphone app has risen 43% in the last year. And gas prices are up 9%, insurance another 5%. And yes, consumers have noticed: The number of people canceling their lease agreements because of unexpected expenses—like higher insurance or maintenance costs--is up 150% this year over last year, according to LeaseTrader.com.
Of course, sometimes there's no practical alternative. Renting a smartphone or a home appliance doesn't make much sense in this day and age; when brakes or tires wear down, replacing them isn't optional. But that doesn't mean ownership has to be quite as expensive as it has become. SmartMoney did an analysis of five bigger-ticket items, their true cost, and easy ways to keep the money faucet to a trickle. Here's what you need to know.
The number of consumers buying e-readers, like the Kindle or Nook, tripled this year, to roughly 6.4 million, according to the Consumer Electronics Association. Once they own the device, consumers buy about three books a month, according to Marketing and Research Resources. That totals about $300 to $380 per year on books, plus the cost of magazine and newspaper app downloads (for example, a monthly subscription to The Wall Street Journal costs $15; the most-downloaded magazine, the New Yorker, costs $3 per month). Cases and screen protectors start at $15 and go up.
Total Cost: Voracious readers and media hounds should budget up to $785 extra per year.
Easy Trim: Find a book-share partner. Nook users can lend a purchased e-book to another Nook owner. Amazon will offer a similar service for Kindle owners before the end of the year.
Over the course of a two-year smart phone contract, the average buyer pays $2,140 for their plan, plus talk time, data, and extras, according to BillShrink.com, which tracks the wireless industry. That's up 13% over the past three years. Then there's the tax bill. On average, wireless service is taxed at about a 15% rate, with rates higher than 20% in Washington, Nebraska, Florida and New York. Want that hot new app? Prices are rising there, too — up 43% over the past year to about $2.85 per, according to KnowYourCell.com, which tracks the mobile phone industry.
Total Cost: Up to $3,400 over two years.
Easy Trim: If you mostly use your phone to make calls, surf the Web and download music in areas with wifi networks, you can get away with the most basic data plan and save up to $1,000 per year. With AT&T's limited data plan, the iPhone 4, for example, costs about $2,400 over two years, but with unlimited data, that increases to around $3,300 — one of the priciest packages available.
Video Game Systems
Nearly 70% of U.S. households play video games, according to the Entertainment Software Association. And while major manufacturers, like Nintendo, Sony or Microsoft, haven't introduced new systems lately, they are rolling out new, pricey accessories. For $150 each, Microsoft's Kinect motion controller for Xbox 360 has sold more than 2.5 million units since introduced last month, for example. The average gamer also buys four games per year at an average cost of $40 each, although prices run up to $100, says Loren Johnson, senior industry analyst at tech research firm Frost & Sullivan. And then there are the extra remotes. The Nintendo Wii system, for example, comes with only one remote controller, even though up to four people can play; each remote is $30 or more.
Total Cost: About $160 to $300 per year, initial console purchase not included.
Easy Trim: Video game rentals start at about $6 on GameFly.com, and on Gamerang.com—a sort of Netflix for video games—gamers can rent an unlimited number of video games each month for $18. Or swap games at online game swap stores on Swap.com and Goozex.com—you'll pay swapping fees of 50 cents to $2 depending on the site, plus shipping.
Owning a Car
A car's true cost of ownership rose about 15% this year, which means that popular car models like the 2010 Toyota Camry and Honda Accord cost a whopping 60% more than the sticker price over the first five years of ownership, according to Edmunds.com. That includes an expected $4,000 on maintenance and $6,000 on insurance. Then there are the incidentals, like parking in a major city ($5,000 per year), or interest on a car loan (say, another $1,600). "Many buyers are in a state of denial, watching a car ad on TV and thinking 'oh I can afford that'," says Phil Reed, a senior editor at Edmunds.com
Total Cost: In the first five years, drivers can expect to spend $3,600 per year.
Easy Trim: Dealerships often offer coupons and discounts for maintenance while the car is under warranty. If you're in the market to buy, consider deals that include scheduled maintenance for cars that are similar—and close to the same price—as ones you already like.
About one in four consumers don't consider things like installation and maintenance when buying an appliance, according to J.D. Power & Associates. But the cost of owning that deep-freeze or washer is at least 50% more that what you pay at the register, and shipping and set-up on some appliances can run about $200 or more, particularly if you need, say, a new gas line for an oven or a water line for a washer, says Christina Cooley, manager of the home improvement department at J.D. Power. And repair costs are up about 20%, according to appliance repair experts. That's partly because consumers are keeping appliance longer in an effort to save money. The cost of repairing a clogged washing machine: $200 and up.
Total Cost: Over 10 years, the ongoing costs of a popular-model refrigerator will run about $1,700 — assuming only one breakdown.
Easy Trim: Skipping the warranty can save $300 or more. A new appliance probably won't need to be repaired in the first five years, says Cooley.