Budgeting: Should you buy a phone outright or on contract? Compare the total
Whether to buy a phone outright or on contract comes down to the total over the contract's length. In a worked example, buying a 700 phone and using a 10 SIM-only plan costs 940 over two years, against 1,080 on a 45-a-month contract.
By Wealtie Team · 3 min read
Key takeaways
- Compare the total cost over the contract's length, not the monthly price.
- In a worked example, a 700 phone with a 10 SIM-only plan costs 940 over two years, against 1,080 on a 45-a-month contract.
- Keeping a phone after the contract ends, on SIM-only, is often where the biggest saving is.
- A contract can make sense if you can't pay upfront and the total is close, but avoid long contracts for phones you'll replace early.
Should you buy a phone outright or on contract?
Work out the total over the contract's length for each option, then compare. A contract bundles the phone and the plan into one monthly payment, which can hide how much you're paying for the phone itself. Writing both totals side by side, on the same timescale, makes the difference obvious in a couple of minutes. Buying outright and pairing it with a cheaper SIM-only plan is often cheaper, but not always, so the sum matters.
How do the totals compare?
Here's a worked example over two years, in round numbers that work in any currency:
| Option | Upfront | Monthly | Two-year total |
|---|---|---|---|
| Buy outright, SIM-only plan | 700 | 10 | 940 |
| Contract with phone included | 0 | 45 | 1,080 |
Buying outright saves 140 over two years here. Include any upfront fee, delivery or activation charges in the contract total. Your figures depend on the phone, the plan and any upfront fee on the contract, so check the total amount payable for each.
Where's the biggest saving?
After the contract ends. Many people stay on the same monthly payment once a contract finishes, even though the phone's paid off. Switching to a SIM-only plan, or asking your provider to lower the price, can cut the bill a lot. If you keep the phone for a third year on SIM-only at 10 a month, that's 120 for the year, far less than another contract.
Check whether your contract has a mid-contract price rise written in, too. Set a reminder for when your contract ends, so you don't keep paying for a phone you already own. How to save money on phone bill has more on cutting the plan itself.
When does a contract make sense?
When you can't pay upfront and the total is close to buying outright, or when a contract deal includes something you'd pay for anyway. Some contracts come with a low upfront cost and a fair monthly price. Compare the total, and check whether the price rises during the contract, since some include yearly increases.
A contract also spreads the cost into a predictable monthly bill, which some people find easier to budget. Just make sure you're not paying much more for that convenience.
What about family or multi-line deals?
Some providers offer discounts for several lines on one account, which can cut the cost for a household. Compare the total for everyone against separate SIM-only plans, and check what happens if one person wants to leave early. Make sure the account holder is happy to be responsible for every line, since they'll be chased if a payment's missed.
Is it worth buying a phone outright with credit?
Usually not, if the credit charges interest, since that adds to the price. Interest-free payment plans from the manufacturer or a retailer can work if you're sure you'll make every payment on time. Treat them like any other borrowing and add the payments to your budget.
How else can you spend less on a phone?
A few ideas:
- Buy last year's model, which often costs much less and does almost everything
- Buy a refurbished phone from a reputable seller, with a warranty
- Keep your phone longer, with a new battery if needed
- Sell or trade in your old phone to put toward the new one
- Choose a plan with the data you use, not the most you might use
Check your phone's data use for the last few months before choosing a plan, which your phone's settings show. Many people pay for far more than they use. Looking after the battery and using a case helps too, since a phone that lasts four years costs much less per year than one replaced every two.
What about phone insurance?
Check whether you already have cover through your home insurance or bank account before buying it separately. Insurance offered with a contract can be expensive for what it covers. A good case and screen protector cost far less and prevent a lot of damage.
How do you track a phone contract in Wealtie?
Set the contract up as a monthly recurring transaction with the bill tracker, with the number of payments left, so the card shows how far through you are and you can see when it ends. When you switch to SIM-only, edit the rule, and every payment after that uses the new amount. Logging phone costs in your expense categories shows what your phone costs over a year.
Questions people ask
Often cheaper outright with a SIM-only plan, but compare the total over the contract's length. In a worked example, outright cost 940 over two years against 1,080 on contract.
Switch to a SIM-only plan or ask for a lower price, since the phone is paid off. Staying on the same payment is a common way to overpay.
Usually much cheaper per month, because you're not paying for the phone. It works best if you own your phone.
It can save a lot, as long as you buy from a reputable seller that offers a warranty.
This article is general information, not financial, tax or legal advice. Your situation is your own; check the numbers that apply to you before you act on them.
