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Why buying a phone on contract could be a waste of money
You could be spending over £1,000 more than you need to if you buy the iPhone Duo on contract
Adam covers home improvements and mobile networks, splitting his time investigating topics from bathrooms to phone contracts. He was shortlisted at the BSME Talent Awards 2024.
Buying an expensive phone on contract can be a tempting option, especially in the face of what looks like a (relatively) low monthly fee.
Take the new iPhone Duo – £80 a month might seem doable for a phone that costs £1,999, but in reality, you'd be paying far more than you might need to.
Find out how to avoid an expensive contract trap and save money on both a phone and Sim, even if you want the latest handset.
How phone contracts work
Nearly all phone contracts you'll find today are called 'split' contracts, which means you'll see the amount you're paying to repay the cost of the phone, and the amount you're paying for the Sim, itemised out clearly.
This means you can work out the total amount you're paying for each for the duration of the contract – as we have below – to see how much a phone is really costing you.
How much more could you be paying for an iPhone Duo on contract?
There are two key things to think about if you're considering a phone contract as opposed to buying the phone outright and going Sim-only – the total price you're paying for the handset, and the price each month for the Sim.
We'll illustrate this with the expensive new iPhone Duo, now available to order from the big four networks – EE, O2, Vodafone and Three. But the principle remains the same for any phone bought on contract.
Handset price – around £170 extra
When you look at the total cost of the handset repayment across all four networks, you're spending about £170 extra to spread the cost over two years. That's around an 8.5% increase – hardly welcome on a device that already costs two grand.
Specifically, with EE or O2 an iPhone Duo costs £2,169.36, while with Three or Vodafone it’s £2,167.84.
Sim-price – over £1,100 extra
This is where you could really get stung buying a phone on contract – pricey data Sims.
Where possible we've looked at the default contract that appears when selecting the iPhone Duo on each of the big four websites, or the most 'basic' contract otherwise. All have unlimited data, and there are a lot more options to choose from, but you'll usually always find you're paying more than you need to.
Prices for the Sim-only part of a contract are very similar.
Buying the new iPhone Duo with EE, O2 or Vodafone on a four-year contract would mean paying £37 a month for their basic unlimited data Sim. Over four years, this equates to paying over £1,000 more, compared to a cheap Sim from a virtual network. For example, recently we've seen unlimited data offered for as low as £15 a month on a one-month contract with iD Mobile.
Plus, as all three networks use annual price increases, your Sim bill won’t stay at £37 for long. After 31 March 2027 it will jump to £39.50 a month, then £42 a month after 31 March 2028. This means you'd be paying over £1,140 extra.
Three offers a three-year device contract and £26 for unlimited Lite plan, increasing to £28.30 after 31 March 2027, £30.60 after 31 March 2028. This is a cheaper option, but you could still make big savings with a Sim from a virtual network.
Best value high or unlimited data Sims
Large data contracts are cheaper than ever from a wide range of networks. Here's a selection of today's high and unlimited data Sims.
What's the cheapest way to buy a new phone?
It's almost always cheaper to buy the phone outright from a retailer than on a contract with a network, as you’ll save money with the initial purchase and have control of the Sim portion of the contract. However, phones can be extremely expensive, so there's a fair chance you'll want to spread the cost.
- Look out for interest-free purchase options – both Samsung and Apple offer them, along with various retailers. You can buy an iPhone Duo directly from Apple for £1,999 or £66.63 a month for 30 months, which saves you around £170 compared to buying through a mobile network.
- Consider alternatives like interest-free credit cards. Read our guide to the best interest-free purchase credit cards to find out your options and how it works.
- You can save even more money by not buying the latest phone, or shopping in the refurbished market.
Combine this with our Sim advice mentioned earlier and you could save a significant amount compared to buying a phone on a contract.
Check out our mobile phone reviews to discover Best Buys for under £300 or Great Value phones for under £150.
Where the big four networks can appeal: perks
The big four networks offer lots of perks to try and draw you into a long contract, and these could certainly help to offset the extra cost.
For example, with some Sims EE includes an entertainment extra such as TNT Sports or Apple Music. O2 Priority offers early access to gig tickets, weekly and monthly rewards and deals, or discounted or free streaming such as Disney+.
However, if you think these make the higher Sim prices worthwhile, do the maths carefully to make sure you know how much extra you're paying, and of course whether you'll use the service.
See where your provider ranks in our guide to the best and worst mobile networks.
