If you’re looking to buy a new phone, is it cheaper to buy it outright or on a plan? There are pros and cons to both. Here’s how they differ.
Whether your trusty old phone has finally kicked the bucket, or you just want an upgrade, buying a phone can be confusing.
Modern phones can also be frighteningly expensive and easily set you back more than $2000, depending on the features you’re looking for.
Apart from choosing the features you want from the myriad models available, you’ll need to decide whether to purchase the phone outright or on a month-to-month payment plan.
Read: What to look for when buying a refurbished phone
The option best for you depends mostly on how much initial money you have, or are willing to part with. But who will be using the phone, and how they will use it, should also be taken into consideration.
Buying a phone outright
Mobile phones can be purchased for their full price from many retailers, including appliance and electrical stores, department stores and even supermarkets.
You can also buy phones directly from some of the major manufacturers, including Apple and Samsung.
Phones bought in this way usually don’t come with a SIM card and are not locked to a particular network. This allows users to purchase a SIM card from any carrier they wish, or even multiple carriers if the phone supports dual-SIMs or eSIMs.
Read: What is an eSIM?
Buying a phone on a plan
Your other option when buying a new phone is to purchase it on a monthly plan from a telco such as Telstra, Optus or Vodafone.
As the name suggests, rather than paying the full cost of the phone upfront, you pay off the phone in monthly instalments. Contracts are usually for 24 months, but 36-month contracts are also not uncommon.
However, the trade-off is that unlike buying a phone outright, you are locked into using (and paying for) the network of whatever telco you bought the phone from.
So, which is cheaper?
The reality is that if you can afford the high initial outlay, buying a phone outright is often the cheapest option. But it’s not necessarily the in the cost of the phone itself that you’re being stung.
Telcos make their real money on these monthly plans by locking you into their network, often on higher rates than other customers.
Read: How to make your old phone last
The overall cost of the phone may be the same either way, but you’ll end up saving a lot more if you’re free to find your own SIM deal from any network.
But there are some scenarios in which buying on a plan could be more beneficial for you.
Finance expert Vanessa Stoykov told News Corp that the decision should come down to who will be using the phone, what it’s for and what suits the individual most.
“I think for cash flow for a business, the plan option works, or if you’re someone with a good regular income,” she says.
“But I think for kids, I’d be buying the phone outright and giving them responsibility.”
Ms Stoykov added that if you’re buying the phone for your teenager, buying it outright and having your teen use a pre-paid SIM may be the better option because it prevents them potentially falling into debt.
“That’s all about teaching them how to budget, forecast and be good with money,” she said.
Did you buy your most recent phone outright or on a plan? Which option do you think is better? Let us know in the comments section below.
