These days, the latest phone release is a must-have for many of us, but the newest handsets can be very expensive. The new iPhone and Samsung models can cost hundreds of dollars and so we are all looking for ways to get a deal. There are so many different phones and plans out there that it can be difficult to work out what is the most cost-effective solution. Before you splash out on a new phone, it is important that you compare all of the options.
To help everyone out there get the best deal, here is a comparison between buying a phone outright and signing up for a plan.
What Happens When You Sign Up For a Phone Plan?
Signing up for a phone plan means that you choose a handset, the length of the contract, and a specific set of terms with regard to using the phone for calls, texts, and data. One major benefit of a plan is that you will get a certain amount of minutes and texts for free each month. While this can help you save money, you will be locked into the plan until the contract expires. You will pay for the phone in monthly installments until the end of the one or two-year contract, at which time the phone will be yours.
What Happens When You Buy the Phone Outright?
Buying the phone means that you pay the full amount for the phone straight away. This means that the phone belongs to you immediately, rather than with a plan where the phone isn’t fully yours until the end of the contract. When you buy the phone outright you can then choose whatever provider you want and just insert the sim card for that provider.
What is the Best Option?
Many people believe that buying a phone on a plan is a cheaper option, but the reality is that if this was the case, the phone stores would not sell plans. The finance expert from moneyat30.com explains that the whole point of a plan is to lock you into a contract in order to make money from you. While you will save money in the first instance as you don’t need to pay anything upfront, the cumulative cost across the duration of the contract means that you will usually be significantly out of pocket compared to if you had purchased the phone outright. Furthermore, if you want to break the contract for any reason, you will most likely have to pay early termination fees. If you aren’t bothered about higher fees because you just want the latest handset, however, then a phone plan may still be a good option for you as you can upgrade your phone every year when the latest model is released.
How Much Can You Save By Buying a Phone Outright?
There are various factors that affect how much money you can save by buying the phone outright rather than on a plan. As you will not be signed up to a contract, you will need to buy a sim and then pay for the calls and texts. You will also need to pay for your own insurance which is often offered with a phone plan but not when you just buy the handset. These days, the newest phone models can cost upwards of $1,000 but with plans often starting at $100 a month, you will have saved $200 immediately which you can use towards calls and texts on a SIM-only plan.
SIM-only plans are usually cheaper than locked-in monthly contracts and also give you the freedom to change providers whenever you want. Many people choose to use a prepaid SIM so that they only pay for the calls, texts, and data they use, rather than for a bundle of calls and texts each month. This can help you to budget more effectively when it comes to the money you spend on phone usage. It is important to note that in order to change SIM cards and providers you will have to get the phone unlocked if it was previously locked into a certain plan. There are various shops where this can be done and it is relatively easy and inexpensive.
While monthly phone plans may seem like the best option they are quite often more expensive in the long run than buying new or refurbished phones. Between the monthly payments and the long restrictive contracts, the cost really starts to add up by the time the plan has finished. If you are looking to buy a new phone, choose your favorite handset to buy outright, and then look for a great SIM-only plan.