12 Jan 2019
Is a new phone calling?
By Brock Lamke | Accountant at DW Mathers & Co.

Smart phones are almost a necessity in today’s busy world and people rely on them for all the little tasks such as GPS, keeping in touch with friends, family and celebrities via social media or just wasting time while waiting for the bus. When our phones start to let us down, we are usually pretty quick to go upgrade. So, with all the options of different plans and contracts out there, which one is the best option for your personal needs?

Firstly, let’s go through the three options:

  1. Purchasing a phone outright and getting a prepaid sim or a sim only plan;
  2. Buying the phone as part of a contract where you pay it off usually over a 24-month period; or
  3. Lease a phone over the life of your contract.

Each of these options have their pros and cons depending on what sort of relationship you have with your phone.

Purchasing a phone can come at large upfront cost but can save you money over the long run. Buying a phone is more beneficial for people who keep their phone for extended periods of time: usually greater than two years. So, if you are reading this on your iPhone 4 or Samsung Galaxy S2 this might be the best option for you. Once you’ve purchased a phone, you will need to find a sim only plan. There are so many providers to choose from with SIM only plans, so your best bet is to shop around and see what is out there.

Buying a phone as part of a contract is the most common way of upgrading your phone. This is where you pay a monthly fee to cover both your plan and the handset costs. This can be great option if you can’t afford to purchase a new phone outright but have capacity to afford monthly plan payments.

Finally, leasing a phone: this works similarly to the plan above. Though, you don’t ever own the phone, which means at the end of your 24-month contract you will have to keep paying your monthly bill to continue using your phone and you will never be able to sell the old phone. This plan can be beneficial to people who always need the latest device as they can pay less and at the end of their contract immediately upgrade to the newest model. Although if you are prone to damaging your phone this can be an issue as you will need to pay a fee if the phone is damaged.

To calculate the differences in price overall, I did a quick case study. I want to purchase a new Google Pixel 3 64gb Black phone and I need unlimited calls, unlimited texts and at least 8gb of data. Plus, due to the amount I travel I would like to be on the Telstra network. I found that this would cost me on a 24 month plan $79 per month to lease the phone, $89 per month to buy the phone and $1,199 plus $29 per month if I want to buy the phone outright. The graph to the right compares these three options.

As you can see, buying a phone becomes more beneficial in comparison to a monthly plan arrangement by the 20th month and is equal to leasing as of the 24th month. Plus, you have the added benefit of owning the phone, so you can sell it compared to leasing. Therefore, in my case if I can afford the upfront costs of purchasing a phone, I will be better off in the long run. Especially if I keep the phone longer than two years.

Remember to take into consideration your cashflow before making any decisions regarding the purchase of your phone. If you need any assistance with your cashflow or any other financial services, please contact us today.

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Daniel Mathers is an authorised representative (1238174) of Hunter Green Pty Ltd (AFSL 225962). Emily Matthews is an authorised representative (1261200) of Hunter Green Pty Ltd (AFSL 225962). Future Key Financial Pty Ltd ACN 608 953 840 is a Corporate Authorised Representative (1238170) of Hunter Green Pty Ltd (AFSL 225962). The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. We recommend that you seek for specific financial advice if you require advice that takes into account your personal circumstances.