Pay now or pay (more) later
With the latest iPhones 7 series now on pre-order and new Samsung Galaxy models already available, super-keen smartphone users have a big decision about upgrading – but what's the smart way to buy your new smartphone?
With the Australian dollar falling against the US dollar, local prices for these premium phones exceed $1000 for even the entry-level iPhone 7 models. The BYO phone plans offer generous GBs of data, so should you stump up the dollars to buy your next phone and have the luxury of maximising your plan with your chosen provider?
We crunch the numbers to help you decide if you should buy outright, or on a plan.
Pros and cons
It's hard to resist the shiny lure of a the latest high-tech smartphone. As you'll see from our smartphone buying guide, they've got a lot to offer. So do you pay upfront or pay as you go? The answer isn't simple because there are pros and cons for both approaches.
- Buying outright can put a sizeable dent in your wallet, but at least you own the phone – it means you can switch to any carrier that has the cheapest phone plan and feel free to swap later down the track.
- Buying on a plan makes it easy to put that new phone in your pocket without passing up your annual holiday, because it spreads the phone's cost over 24 months. The downside of this is that you're stuck with that carrier for the life of the contract.
There's no easy solution, but if you know the pros and cons of each approach you can pick the pathway that suits you best. Here's how they stack up.
Buy outright + SIM-only plan vs 24-month contract
First, look at the outright cost of the phone and then add in the cost of a SIM-only plan over 24 months. SIM-only plans are available from telcos including Telstra, Optus, Vodafone and Amaysim. It's not pre-paid or pay-as-you-go, although that's another option too.
There are examples below to give you some idea of the options to combine phone and SIM and compare with some plans. We've used these as a starting point for comparison, but there are other plans with more or less data to choose from. To apply this idea to your situation, look at how much data you need and compare plans at that price point. There will also be other considerations such as special deals, bonus offers and so on that will vary with your particular situation.
Cost of new iPhone and Samsung smartphones
- iPhone 7 32GB: $1079
- iPhone 7 Plus 32GB: $1269
- Samsung Galaxy S7 32GB: $1149
- HTC10 32GB: $1099
- LG G5 32GB: $1099
- Amaysim: $40 7GB data with unlimited phone calls, SMS/MMS and network calls.
- Optus: $40 8GB data with unlimited phone calls, SMS/MMS, 300 international call minutes to select countries and data-free music streaming (12-month plan).
- Telstra: $50 5GB data with unlimited SMS/MMS and $1000 credit for Australian calls (12-month plan).
- Vodafone: $50 6GB data with 300 mins for standard international calls from Australia to selected countries and 1000 mins to Super 1000 countries (month-to-month).
Compare contract phone plans
Here's a sample of mid-range contract plans that include the phone and internet and calls and SMS allowance.
iPhone 7/ 7 Plus 32GB
- Telstra $99//$116/month with 10GB data and unlimited talk, text and international calls and text to 10 select countries on 24-month contract.
- Optus $87/month with 8GB/$100 with 8GB data and unlimited national talk and text with 300 international minutes to selection countries and data-free music streaming.
- Vodafone $92/$103/month with 7GB data and 300 mins for standard international calls from Australia to selected countries and 1000 mins to Super 1000 countries.
- Virgin Mobile $85/$99/month with 7GB data and unlimited standard national calls and text, $300 (7 Plus $500) standard international calls and text.
Samsung Galaxy S7 32GB
- Telstra $95/month with 10GB data and unlimited talk, text and international calls and text to 10 select countries on 24-month contract.
- Optus $85/month with 8GB data and unlimited national talk and text with 300 international minutes to selection coutnries and data-free music streaming.
- Vodafone $87 month with 8GB data and 300 mins for standard international calls from Australia to selected countries and 1000 mins to Super 1000 countries.
- Virgin Mobile $80/month with 9GB data and unlimited standard national calls and text, $500 standard international calls and text and unlimited calls from Oz to UK, USA, NZ, China, India, Canada and Singapore.
Your decision may come down to upfront cost vs data value when deciding between buying a phone outright or opting for a phone on a contract. It can often be better value to buy a phone outright because SIM-only plans tend to have more data and phone allowances, plus there's always the option to switch for a better deal, but it involves a significant upfront cost. The plan cost may be a little less over the two-year life of the contract, but include less data value.
Reasons to buy outright:
- Must find the money for upfront cost or use potentially expensive finance or loan.
- Can re-sell and upgrade after 12 months.
- Freedom to shop around for a SIM-only plan with more or less data and phone to suit your usage.
- Not locked to one provider so can swap SIMs for travel.
- Freedom to change providers.
Reasons to go on contract:
- No need to pay for the phone upfront.
- Locked to that network for 24 months.
- Get discounts for bundling other services such as internet or phone phone.
- Bonus offers such as free streaming deals.
- Warranty coverage for the life of the contract (check with provider).
- Can include damage insurance from the provider (extra cost).
Over to you
We invite you to share you experiences in the comments to help others who are weighing up their options.
What have you chosen?
Have you found a good deal?
How did you make the choice?
What are you looking for with your next phone or plan?