Should I buy a phone outright or on a plan?

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Buying a smartphone is always exciting, but it can also be a confusing prospect. Depending on which phone you’re looking at, it can be an expensive purchase and for many of us, spending thousands of dollars on a new smartphone isn’t something we can always afford.

So the big question remains — what is the best way to buy a new phone? Should you buy a phone outright or on a phone plan? There are certainly pros and cons to both options, and in this guide, we aim to lay out all the details so you can decide which option will be best for you.

What’s the difference between buying a phone outright or on a plan?

If you’re looking into a buying a new smartphone, you’ll have two choices on how to buy the device — buy it outright from a retailer or go to one of the telcos which offer mobile phone plans, and buy your phone on a plan or contract.

Buying outright means you’ll generally go to a retailer — either directly to the smartphone manufacturer, or a retail store that sells tech — and pay for your phone upfront with the full amount, just like you would make any other purchase from a retailer. Some retailers, such as Apple and Samsung, might offer the option to finance your phone, which are payment plans where you can split the cost of your device over a certain amount of time, but these options might involve a contract or other catches such as paying with a credit card.

When you buy a mobile phone on a plan, this will generally be from a telco such as Telstra or Optus. These companies allow you to buy a new phone which is bundled with a phone plan (usually a postpaid phone plan). This means you’re automatically getting the SIM card and mobile phone service with the phone all in one go, and you will be billed monthly for your device and your phone plan on the same bill. Phone on a plan options are generally spread over 12, 24 or 36-month contracts, depending on the carrier.

Is it cheaper to buy a phone outright?

Buying a smartphone outright can be cheaper than buying it on a plan in the long run, but what generally makes it cheaper to buy a phone outright is that you’re not locked to a plan from the same mobile phone provider. Often postpaid phone plans that you bundle with a new smartphone are more expensive, and you can generally get great value at a cheaper price from a SIM-only phone plan from smaller telcos.

Excluding the phone plan costs that you sign up to if you choose a phone-on-a-plan, there is little difference in the overall price of a smartphone whether you buy it outright or on a plan.

Is it cheaper to buy an iPhone outright or on a plan?

If you were looking to buy the 64GB iPhone 11 outright, here is what you would pay outright (from the Apple store) compared to buying an iPhone 11 on a plan:

  • 64GB iPhone 11 from the Apple store (outright) — $1,199 AUD
  • 64GB iPhone 11 from Telstra (24 month plan, excludes phone plan costs)  — $1,198.80 AUD
  • 64GB iPhone 11 from Optus (12, 24 or 36 month plan, excludes phone plan costs) — $1,198.80 AUD
  • 64GB iPhone 11 from Vodafone (12, 24 or 36 month plan, excludes phone plan costs) — $1,199 AUD

Apple also offers financing over 24 months with 0% interest (telcos also offer 0% interest). However, you’ll need to be on an eligible credit card for access to the 0% interest fee, making this payment plan option more complicated than buying as a phone on a plan from a telco.

So, if you want to know if its cheaper to buy an iPhone outright than on a plan, it’s clear that there is very little difference between the two when comparing the overall price of the device only.

The following table lists a selection of published 24-month plans for the 64GB iPhone 11 on Canstar Blue’s database, listed in order of standard cost from the lowest to highest and then by data allowance, largest to smallest. Use our comparison tool to see plans from a range of providers. This table includes products with links to a referral partner.

Is it cheaper to buy a Samsung phone outright or on a plan?

As another example, if you were looking to buy the 128GB Samsung Galaxy S20 5G device, here is what you would pay outright (from the Samsung store) compared to buying the phone on a plan:

  • 128GB Samsung Galaxy S20 5G from the Samsung store (outright) — $1,499 AUD
  • 128GB Samsung Galaxy S20 5G from Telstra (24 month plan, excludes phone plan costs)  — $1,499 AUD
  • 128GB Samsung Galaxy S20 5G from Optus (12, 24 or 36 month plan, excludes phone plan costs) — $1,498.32 AUD
  • 128GB Samsung Galaxy S20 5G from Vodafone (12, 24 or 36 month plan, excludes phone plan costs) — $1,499 AUD

Buying outright or on a plan makes very little difference in the overall cost of a Samsung device when comparing the prices (excluding phone plan fees). Samsung also offers financing, but over your choice of 12, 24 or 36 months. Like Apple, you’ll need to use an eligible credit card to access the 0% interest, compared to buying on a phone plan where you’re billed monthly and not tied to paying with a credit card.

The following table lists a selection of published 24-month plans for the 128GB Samsung Galaxy S20 5G on Canstar Blue’s database, listed in order of standard cost from lowest to highest and then by data allowance, largest to smallest. Use our comparison tool to see plans from a range of providers. This table includes products with links to a referral partner.

It’s clear that the carriers don’t generally charge more for the device than the manufacturers (or retailers) do. The mobile plan costs are usually what makes buying on a plan so expensive, however do keep in mind that Telstra, Optus and Vodafone no longer use lock-in contracts for phone plans. Instead your device repayments are separate from your phone plan costs — the device payments are on a 12, 24 or 36 month ‘contract’, while the phone plans are month-to-month. This means you can switch between plans from the same provider, but cancelling altogether requires you to pay off the reminder of your device.

Some smartphones, especially cheap phones, may not be available on a phone plan from a telco, so you may have no choice but to buy outright. Likewise if the phone you want is no longer available from your telco of choice, or they no longer have stocks of your preferred storage size or colour.

However, if you have the choice of buying a phone outright or on a plan, and can’t decide which is better, let’s take a look at the pros and cons of both options.

Apple's iPhone 11 in six colours
Source: Apple

Pros and cons of buying a phone outright

Buying phone outright: Pros

  • You own the phone straightaway like any other purchase you buy outright
  • No contract to sign
  • More choice of SIM-only phone plans to pair with your phone
  • No ongoing cost over a year or more (except repair fees, etc)

Buying phone outright: Cons

  • Expensive upfront cost (depending on the phone)
  • You might miss out on bonuses, perks, discounts, etc offered by telcos
  • You could miss out on device discounts, as some telcos might waive the last couple months of your current plan if you sign up to a new one

Pros and cons of buying a phone on a plan

Phone on a plan: Pros

  • Device cost spread out over 12, 24 or 36 months (interest free)
  • Phone already has a plan bundled in
  • If you upgrade your phone with the same telco, you might not need to change SIM card, port your number, etc
  • Discounts, perks, etc regularly offered by telcos when buying new phone
  • You might be able to bundle phone plan with other plans (phone, internet, entertainment, etc) and may receive discounts for bundling

Phone on a plan: Cons

  • You’re locked into a contract to pay off your device
  • You don’t own the phone outright until the device is paid off
  • Telcos may run a credit check before you sign up
  • Limited selection of phones to choose from — devices are usually expensive, premium phones
  • Limited selection of phone plans
  • Device may be locked to the telco, making it harder to switch plans down the track
  • There could be fees for phone damage, etc, while you’re still paying off your device

Which telcos offer phone on a plan?

If you’re looking at buying a new smartphone on a plan, you’ll have several telcos to choose from. Telstra, Optus and Vodafone are the biggest providers to offer phones on plans and generally have the latest models including iPhones, Samsung Galaxy phones and a selection of devices from other phone brands.

You can also pick up a new phone on a plan from Woolworths Mobile, Southern Phone and TeleChoice. Woolworths Mobile stocks a wide selection of Samsung and OPPO phones, including the latest Samsung releases, which makes the telco a great alternative to the big three if you’re after the newest Samsung Galaxy S20 series or Note 20 phones. Southern Phone also stocks Samsung and a small range of phones from other providers, while TeleChoice offers a wide-range of devices from several big names including Samsung and OPPO along with older iPhone models and pre-owned phones.

Do you own the phone at the end of the phone plan?

Samsung S20 phones in pink, blue and grey
Source: Samsung

Many people assume that when you buy a phone on a plan, you don’t own the phone. This is technically not true. Once you’ve paid off your device, the phone is yours to keep. As long as you’ve paid the full amount for your device — whether that’s at the end of the contract or after cancelling your plan — you get to keep your phone.

That means if you want to cancel your plan, you can technically pay off your phone contract early, whether its with Vodafone, Telstra, etc. However, you should always talk to your telco if you do want to cancel to make sure there are no additional cancellation fees apart from paying off your device.

Some telcos might offer the option to upgrade your device after a year. In this case, you’ll be required to return your phone in good working order. The only way to keep the phone and upgrade early, is to pay off the remainder of the device. You may then also need to pay extra fees such as cancellation fees, etc.

Of course, before you sign up to any plan, you should check all the plan details to make sure you know what you’re signing up to. If you’re uncertain if your telco of choice will let you keep the device at the end of the contract, you can always ask before you sign up.

One catch is that if your device is damaged and not covered under warranty (the warranty might not cover damage caused by you, such as a dropped phone), you may have to get your device repaired through the telco rather than the manufacturer or repair service. If you decide not to take out any device insurance and you’re worried about warranty and possible repair/replacement costs, get in touch with your telco of choice to find out more.

Good quality cheap smartphones to buy outright

If you’re set on buying a smartphone outright, the good news is that if you want a top-quality phone, you don’t have to spend over $1,000. With smartphone technology improving with each year, there are plenty of smartphone manufacturers producing great phones at much cheaper prices than premium phones.

Brands like OPPO, Realme, Nokia, Motorola, Alcatel, Google and even Samsung (the Samsung Galaxy A series) have lower to mid-range budget phones that cost under $1,000. The biggest difference between premium phones and the budget models is often in the cameras, and other details such as processors and materials used.

However, for the most part if you’re not dedicated to getting the best smartphone camera and all the flashy details of a premium device, you’ll still find excellent quality with a cheap smartphone, whether its a $300 phone or a $700 phone.

Is it better to buy a phone on a plan vs outright?

So, you’ve gone through all the points we’ve covered in this guide and still can’t decide which option is better for you, especially if you want to know what is the cheapest way to own a mobile phone. Choosing whether to buy a new phone on a plan or outright can really be answered by asking yourself one simple question: which option can you afford?

If you don’t have enough money to buy the device you want outright, choosing to spread your device payment over a couple years might be more manageable for you. Considering that for the most part, there is little price difference between buying a device outright and on a plan from a telco, no one option is no cheaper than the other.

While device prices may be around the same for both options, the phone plans you’ll need to bundle with might be the deal breaker and out of your budget. Good postpaid phone plans that are bundled with a new smartphone can start for as little as $9 and go all the way up to over $100 — and that’s just the phone plan, not including device payments. If the device you want is only available from a limited number of telcos, you might need to set a budget to weigh up the maximum monthly phone plan you can afford to help determine if a phone on a plan is within your monthly price range.

If you don’t desperately need a new smartphone right now, you might be better off saving up to buy your new phone outright and then bundling with a cheap SIM-only phone plan. If you’re not a heavy mobile data user but do use your phone for web browsing, social media and some video streaming, a plan with around 10GB of data can cost around $20-$30 per month.

All in all, you’ll really need to weigh up the pros and cons of both options and how they suit your phone plan needs and budget. Buying a phone on a plan is quite a popular way to afford the latest smartphone releases without the huge upfront costs, but there are downsides. Whichever way works for you, do your research, work out your budget and compare phone plans from a wide range of providers so you can find the best phone plan to suit your needs.

Cheap SIM-Only Phone Plans

If you’re buying a phone outright, you’ll need a SIM-only plan to go with it. Here’s a selection of cheap prepaid and postpaid phone plans you might want to pair with your new phone.

Prepaid Plans Under $40

Here is a selection of prepaid plans from Canstar Blue’s database for $40 or less, listed in order of standard cost, lowest to highest, then by standard data allowance, largest to smallest. Use our comparison tool to see a wider range of plans from other providers. This table includes products with links to referral partners.

Postpaid Plans Under $40

Here is a selection of postpaid plans from Canstar Blue’s database for $40 or less, listed in order of standard cost, lowest to highest, then by standard data allowance, largest to smallest. Use our comparison tool to see a wider range of plans from other providers. This table includes products with links to referral partners.

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