We’re often asked whether it’s cheaper to buy a smartphone on a contract plan, or outright with a BYO phone SIM card — especially whenever Apple announces a new iPhone. Many assume that buying a phone on a contract gets you the biggest savings, thanks to telco handset subsidies, but a spate of competitive, data-packed SIM only options means the choice is trickier than it’s ever been.
To answer this question, we’ve taken a close look at both the new 64GB and 256GB iPhone 8 models and compared the price of buying the phone on a 24 month contract to the cost of buying it outright and taking up a comparable non contract plan from the same provider. We then compared the cost of buying the iPhone 8 outright and taking up 24 months of service from a BYO phone option such as Amaysim, Vaya and Aldi Mobile.
For the record, the results are pretty similar when comparing prices for the iPhone 8 Plus.
While you can still save money by buying on a contract, the savings might not be as significant as you might think. In some cases, you're actually paying more if you want to buy your iPhone 8 on a contract, on others, you can save about $300 or so over the two year period.
SIM only providers such as Vaya, Amaysim, and Jeenee Mobile also tend to be a good value proposition, especially when it comes to cheaper plans,
Not having a contract means you're free to come and go as you like, and step up or down in plan size on a monthly basis, according to your usage. It also means you're able to take up better value deals as they come around. Given how competitive the local telco scene has been in the past few years, we're only going to see data per dollar climb higher and higher.
Of course, buying outright does mean you need to plonk down over $1,000 in one go to buy your phone, which isn't always as palatable as a comparatively low monthly fee. Telcos are also increasingly throwing in bonuses to customers who sign up for a 24 month contract.
With Optus, you can get a free subscription to Optus Sport and data-free accessing to Spotify, Netflix, Stan, and more. On Telstra, you'll get data-free access to Apple Music, free access to AFL and NRL apps, in some cases, a Foxtel Now subscription. and . Not all of these inclusions will be attractive to everyone, but they're worth considering if you're using these services. For example, if you're an avid Foxtel Now subscriber, you can save easily yourself $180 with a Telstra contract.
Vodafone is an interesting outlier now, thanks to a recent change in the way it sells phone plans. The telco splits your service bill from the actual cost of your phone; your plan is offered on a no-contract month-to-month basis, while you pay off the outright cost of your phone over 12, 24, or 36 months. There's no interest charged, and if you'd like to cancel your Vodafone mobile plan, just pay out the remaining balance of your phone. The plans are similar to Vodafone's 12-month SIM only options, but in some cases, Vodafone will throw in bonus data for buying a phone from them.
Even if you're not after a new iPhone, it's worth considering the pros and cons of buying a smartphone outright as opposed to on contract. If you're happy to bear the upfront cost, you can almost certainly save money by going with a SIM only offering from one of the big telcos or an MVNO like Jeenee or Vaya. At the same time, many 24 month contracts work can still work out to be great value, provide nifty bonuses, and offer a much more manageable way of dealing with a big purchase.
What about a leasing plan?
In the past 12 months, Telstra and Optus have introduced leasing plans as an alternative to pay full-price for a phone on a two phone contract. Optus calls these ‘My Plan Flex’ and Telstra calls them ‘Go Mobile Swap Plans’.
Regardless of the name, the concept is pretty similar across each. You choose a new phone on a lease plan, save on the monthly handset repayment cost and return the phone after 12 months and upgrade to a newer model. Both Telstra and Optus charge a flat $99 fee payable when you choose to upgrade.
Generally, the saving on the handset repayments is $10 per month when you choose a lease plan. You can pocket the saving, or choose a higher value plan with more data.
If you choose to continue with the plan with 24 months, you have the option to return the phone and exit your contract, or pay “fair market value” and keep the handset. At this point you’ll have saved $240 compared to a normal phone plan.
It’s an interesting concept, and it is proving to be quite popular. Of course, the idea of giving the phone back at the end of the contract won’t be for everyone.
Take a look at a comparison of Telstra and Optus phone plans and leasing options below: