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The Economics of owning Samsung Galaxy S 3

In Finance, Uncategorized on May 31, 2012 at 5:58 pm

The Samsung launched its flagship Galaxy S 3 couple of days back in 28 countries. Talking about the smart phone and its great great features is increasing becoming one of the most talked about pub-talks. I don’t own a smart phone myself but my husband is a proud owner of iPhone 4. For last many months he is waiting eagerly for the next big thing ‘The iPhone 5’ (he even check the latest gossip on the proposed launched ……. I emphasize with him).

He is pasturing me for last one year to buy a smart phone. The launch of Samsung Galaxy S 3 tempted me to sneak peek the newest-must-own-gadget. Being finance professional, I always wonder on the economics of ownership. Alright let us begin ……

What would you choose ….. Paris or Galaxy S 3

First the let us understand straight cost of ownership of fully unlocked Galaxy S3 for 12 months:

  • 1 unlocked phone = USD 799 or Euro 645 or GBP 519 or INR 43000 (to keep it simple, I will use USD) = $ 799
  • Screen guard/pouch/accessories = $ 50
  • Insurance 12 months = $ 84
  • Average cost of new apps buy in 12 months (some of them you need, some of them you buy because it is on your friend’s phone) = $ 35
  • Data charge = $ 180
  • Total (A) = $ 1148

(Call charge not taking into consideration, you will need a phone regardless of it being smart or not)

Now let us add the cost you would ignore:

  • Productive working hours you will use fiddling your phone everyday, playing games, exploring apps and admiring photos (assumption taken on minimum wages) = 1 hour * 365 days * $7.25 = $ 2646.25
  • Total (B) = $ 2646.25
  • Assume you will sell the phone after 12 months of usage. The resell value of phone with generic wear-tear will be 40% of MRP = $ 319.6
  • COST OF OWNERSHIP = A+ B  – resell value = $ 1148 + 2646.25 – $ 319.6 = $ 3439. 65 (aaaaawwwwwww !!!)
  • Compared to this cost, if I want to take 1 week of luxurious holiday with my partner in Paris, it would be approx. = $ 2950

My husband would have chosen Samsung Galaxy S3 and I would have chosen an evening in Paris .

What would you do 🙂 ………. Please comment !!!!!

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  1. don’t flush the toilet eithercost will add. you make money to spend it. and you do what makes you happy long or short term

    • Happiness is relative term. Women buy happiness spending on fashion/bags/cosmetics ; men buy happiness by spending on gadgets. hummmmm !!

  2. Where can you get a 1 week luxurious holiday for 2 in Paris including flights from Singapore for $2950? Show me and i’ll take it 🙂

    • Hi Norman,

      Traveling from Singapore is bit expensive. However, if you book in time you can get deals in top hotels from NYC or Edinburgh (where I live) for this much amount. Last year I booked 4 nights in Fraser Suits on Champ Elysee (1 bed apartment) overlooking tour Eiffel for GBP 439. Plan, plan and plan, thats what a mantra from finance professional. 🙂

  3. Hi there, as an Economics student I just thought you might have missed a few relevant costs when you were comparing your net present values.

    1 week in Paris at 24 hours a day less sleep of 8 hours a day is 16*7 = 112 hours of unproductive work. At minimum wage 112*$7.25 = $812.

    It took 10 minutes to find S3’s being sold by Samsung employee’s at $600, saving $199. Further to this you would be replacing your current handset, who’s selling price would reduce the $600 to perhaps $450.

    Most house insurance policies cover mobile phones and so the change in insurance premium after buying an S3 is most likely $0 for many people.

    The S2 is 1 year old and is selling on eBay, in the UK at least, at 60% of initial price. If this occurs for the S3 it would be $480. Compare this to the $450 we paid to switch handsets and we actually profit from switching.

    If you spend an hour on your phone a day it is unlikely your wages will correspondingly fall. Most likely the cost of your unproductive procrastination is born by your employer and not yourself. This effectively removes the bulk of the costs of owning the phone under your calculations.

    The data charges would occur on both a smartphone and a normal phone and the difference would be substantially less than $180. More like $36 over the hypothetical 12 month period.

    By purchasing a handset that can be described as superfluous, our income falls, in falling we tend to reduce consumption of other goods below the level that would have occurred. This reduction in waste must be taken in to account.

    Add back the time saved having Google/GPS etc. on the handset, perhaps 1 in everyone 5 hours of use is gained back.

    Apps, cases, covers, protectors are purchases of items in their own right. By giving up income you gain something more than just the handset. They are not, therefore, associated costs of the handset but rather than the peripherals and cannot be taken in to account.

    You did not include the time used to “research, research, research” for a holiday to Paris at that price, which should also be factored at minimum wage.

    I was interested to find that by running an accurate NPV comparison I was profiting by switching away from Vodafone and getting the S3 for $600 with an all you can eat SIM from three for $80 a year. Just some food for thought!

    • Thanks for your valuable comment and i appreciate your knowledge about the finance. However, I think you are biased and you have a natural inclination towards buying Samsung S3.

      It seems you are calculating all the cost like productive, unproductive cost, opportunity cost, switching cost etc on the Trip to Paris and discounting the cost of Samsung S3 by giving away unproductive tensions to employers and provide all the preference to the user of mobile by sacrificing other things….I hope as an Finance student, when you compare two prices, it is based on its original source (eg: the price offered by Samsung itself) not the price considered as ‘0’ when you get a mobile as gift.

  4. […] blogged about Samsung Galaxy S 3 couple of months back and several people wrote back to me with interesting […]

  5. |I recently bought the new samsung galaxy tablet and i love it theres this app on here called peel smart remote does anyone know how to work it and do i need a cable box to still use this? samsung galaxy http://goo.gl/qhfk

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