Smartphones are the must-have gadgets. They seem to say as much about you as the car you drive or the house you live in these days. And with Apple, Samsung and the other mobile phone makers releasing ever-more powerful phones every 12 months, this is one area where ‘keeping up with the Joneses’ can prove eye-wateringly expensive.
Many smartphone users choose to finance these upgrades through a contract with one of the four major networks – Vodafone, O2, EE or Three. On the face of it, this is an easy decision – your new smartphone is paid for in monthly instalments which are simply added to the cost of your mobile contract.
But by doing this, you’ll be locked in to a contract which often lasts for considerably longer than the upgrade cycles of the manufacturers and is typically 18 or even 24 months. That means that when Apple replaces your iPhone 6S with the iPhone 7, you may have up another year or longer before you can swap your current phone for the new one.
If you buy a phone outright, you won’t be locked in to any such deal if you choose a monthly SIM-only contract and you can simply sell your existing phone and buy the new one. You could even just choose a pay-as-you-go (PAYG) SIM which will give you the ultimate freedom and allow you to change network whenever you want.
Contracts cost you more… a lot more
It’s impossible to know whether Britain’s smartphone users know it but they are being milked by the networks. Figures from Which in 2015 showed that the British are paying at least £90 a year more than they should do on mobile phone contracts. In total, £355 million is being wasted by users every 12 months because they don’t renegotiate the amount they pay to the carrier once their contracts run out.
If you choose to upgrade your phone through your contract, then the cost of the handset is spread over the length of the deal. It’s an attractive prospect – particularly when the cost of buying a new iPhone 6S Plus is close to £700. Instead, you can get the same phone from the biggest network – Vodafone – for a single payment of £9.99 followed by 24 monthly payments of £47. Seems like a no-brainer, doesn’t it?
But if you actually do the sums, then it is clear that financing your phone with the network in this way is a very expensive way of funding it. Over the lifetime of your contract, you will pay £1,137.99 before you actually own the device. That’s nearly £438 more than it would cost you to walk into an Apple shop and buy the handset outright.
If you get your new smartphone from the network, it will also be locked to that particular carrier meaning that you can’t use another operator’s SIM until it is unlocked at the end of your contract. With a SIM-free phone bought separately, you’ll be able to use any of the network’s SIMs.
But what about the cost of calls and data? Don’t they still make it cheaper to buy your phone through the network? If we look at that Vodafone £47 a month deal we see that it includes 3GB of data, unlimited calls and unlimited texts. Yet O2 is offering the same amount of text, calls and data on a SIM-only deal for just £8.58 a month. That means that O2’s offering plus the purchase of an iPhone 6S Plus direct from Apple would cost you £905.92 over 24 months – a saving of £232.07!
With the SIM-only deal, you would also be free to sell your iPhone when the new one comes out later this year and put the money towards the upgraded handset. And we’re not talking pennies, either: second hand iPhone 6S Plus handsets are currently fetching up to £550 on eBay.
If you don’t have the money upfront
Even taking out a personal loan for a new handset will usually work out cheaper than getting the device from a network. If you wanted to borrow, for instance, £700 for a new iPhone and repay it over 24 months, your monthly payments would be £33.68 at 14.2 per cent APR making a total of £808.32. Even factoring in O2’s SIM-only deal, this would be a total cost of £1,014.32 over the two years – a saving of almost £124.
Oliver Jones has written for Solution Loans since 2015. His passion for personal finance comes through in the 150+ blog posts he's written since that time. His talent for explaining all things money means he's covered topics as diverse as...Read about Oliver Jones
It’s strange to know that buying a new phone can be cheaper. I heard it only for refurbished phones. Refurbished phones are new and pristine. The only difference is that these phones are repaired technically after the first buyer found any fault. Technical experts replace its faulty part and make them pristine and then these phones are sold in the market with full benefits. I also bought a refurbished phone from xxxx with all benefits like a return and exchange policy with also brand new accessories.
Good to know I already made the right decision – my son had a Samsung Galaxy Young but he couldn’t do anything expect make and receive calls and texts on it. Even the simplest games and apps couldn’t be downloaded because there was some problem with not enough memory. So he wanted an iphone but, at the time I was only paying £7.50 a month and an iphone was going to cost me a lot more.
So he suggested he could use his birthday and christmas money to buy the phone himself – now I just pay £5 a month for a Sim only deal and he has the phone he wants. So i’m better off and I didn’t have to borrow money or pay more each month.
My teenage son’s also learnt a bit about the value of money so everyone’s happy.
We use cookies to make your experience on our site even better. They also help us to understand how you use our site. By clicking 'Accept All' you're agreeing to our use of cookies. You can change your cookie preferences by choosing 'Manage Settings' and if you want to know more, you can read our cookie policy.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checkbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
It’s strange to know that buying a new phone can be cheaper. I heard it only for refurbished phones. Refurbished phones are new and pristine. The only difference is that these phones are repaired technically after the first buyer found any fault. Technical experts replace its faulty part and make them pristine and then these phones are sold in the market with full benefits. I also bought a refurbished phone from xxxx with all benefits like a return and exchange policy with also brand new accessories.
Good to know I already made the right decision – my son had a Samsung Galaxy Young but he couldn’t do anything expect make and receive calls and texts on it. Even the simplest games and apps couldn’t be downloaded because there was some problem with not enough memory. So he wanted an iphone but, at the time I was only paying £7.50 a month and an iphone was going to cost me a lot more.
So he suggested he could use his birthday and christmas money to buy the phone himself – now I just pay £5 a month for a Sim only deal and he has the phone he wants. So i’m better off and I didn’t have to borrow money or pay more each month.
My teenage son’s also learnt a bit about the value of money so everyone’s happy.