Is it Cheaper to Buy a Phone on Contract or Outright?

If you’re upgrading to a new phone, you have two main options. The traditional way is to buy one from a mobile operator or carrier and take out a contract. This allows you to pay for the device over a number of months, typically lasting two years. As well as the phone your contract includes mobile data, calls and texts.

The other options is to buy the phone from a retailer and pay all of the cost up front, paying separately for a mobile data plan.

With flagship phones being very expensive these days, the latter can seem an expensive route to go down, but it’s worth considering as you may find that over the two years of your contract you could have spent more than you thought.

Here are the pros and cons of each approach.

Are phone contracts good value?

Buying a phone on a contract is the norm for most people. Not only does it spread the cost of the device, it’s just the done thing, another monthly bill to go alongside streaming services, car insurance, broadband and other stuff.

This is good for a lot of people, as it means you know what you’ll be paying each month and you can also get some good deals that offer extra data, minutes or other bonuses such as free subscriptions to streaming services. 

But what are you really paying over those two years? Let’s take a look.

UK contracts

In the UK, at the time of writing, EE was offering the iPhone 15 for £34.86 per month on a 24 month contract with £30 to pay upfront. This means the total amount you pay for the iPhone 15 would be £866, which is £67 more than if you bought it outright from Apple (£799). That’s not a huge difference and certainly would be preferable to a lot of people who don’t want to splurge £800 on a phone in one go. 

You’ll need to pair this with a data plan, such as the Unlimited Data Essentials which offers unlimited calls, texts and data (capped at 100Mbps speed), which costs £35 per month (again for 24-months). 

Put these together and you get a grand total of £69.86 per month for across 24 months, which is £1676.64 overall. 

While I was writing this article, EE dropped the price of the plan from £35 to £24.50 (for a limited time), which brings the total price down to £1387 across the 24-month period. Deals like this are constantly being offered by all the main networks, so you should always shop around and maybe spend a few weeks looking for a deal rather than just spending a couple of hours. You could well save a decent amount of money in the process. 

The alternative approach is to buy an iPhone 15 outright from Apple (or other retailers) for £799. For the purpose of comparison, EE offers the same Unlimited Data Essentials plan as a SIM-only package for £30 per month. Add the two together and you get a total price of £1519 (£799 + £720) saving you a not inconsiderable £157.64 for the same contract and device.

The savings are greater if you don’t get your SIM from one of the major UK operators (EE, BT, Vodafone or Three) and instead use a piggy-back network which simply uses those same networks. For instance, Lyca Mobile runs on the EE network and at the time of writing was offering an unlimited plan for data, calls and texts, for £18 per month for 12-months.

Over two years, your total bill would be £1231 (that’s the iPhone 15 at £799 and 24 months of paying £18 per month to Lyca (£432). This is a saving of £445.64 across two years compared to buying the same phone on an EE contract. 

This is just one example, of course, and you’ll find plenty of other options in our roundup of the best SIM only deals.

You don’t have to buy an iPhone from Apple either, and plenty of retailers were offering a £50 discount. The combination of buying outright (at a discount) and using a piggy-back network is therefore almost £500 cheaper than the contract option we started with. That’s quite a difference, but it’s only possible if you have £749 spare to buy the phone in the first place.

Naturally, there are much cheaper phones available than the latest iPhone which can cost well under £200. Similarly, there’s no need to pay so much for unlimited data. If you use only a few gigabytes per month, there are plenty of great deals that cost around £5 per month.. or less. In fact, if you’re paying more than £1 per GB currently, you can probably switch to a cheaper deal and you can always keep your existing number.

Here’s a selection of the best iPhone 15 deals currently available:

US contracts

What about if you’re in the US and not the UK? How does the North American market compare to the British one? Well, it’s quite different. Contracts don’t lock you in like in the UK, so instead you can take out something like a 36-month agreement to spread the cost of the phone, which essentially keeps you with the provider for the duration of the repayments. You can buy phones unlocked and off-contracts, but that’s uncommon. 

Sticking with the iPhone 15, you can buy one from Apple for $799 if you sign up to a contract with AT&T, T-Mobile or Verizon, but if you want the phone to be unlocked (so you can use it with a different carrier later) then it costs an additional $30. 

You can’t buy an iPhone 15 from Amazon in the US and, right now at least, discounts from other retailers are few and far between. 

One of the best deals is from Visible (owned by Verizon) which offers unlimited data, calls and texts for $20 per month over a 24-month contract. This means, if you were to buy an iPhone 15 unlocked from Apple and signed up with Visible, you’d pay $1309 ($829 + $480) across two years.

You’ll find more in our roundup of the best Bring Your Own Device plans. 

The iPhone 15 is also available on a contract over 36 months from Verizon, costing $23.05 per month which means you don’t pay any extra than you would if you bought it off-contract directly from Apple. 

This would need to be paired with a Bring Your Own Device plan. One example is the Unlimited Starter from AT&T which gives unlimited data, calls and texts, plus 3GB of hotspot data for $65 per month. 

Put simply, the easiest and best option in the US is to stock with buying a phone on contract. 

Should I sign up to a contract or buy a phone outright?

In the UK, you can save a significant amount it you buy a phone outright and get a cheap SIM-only deal. You might lose out on some of the bonuses offered by the big names such as EE, but you’re unlikely to save anything even if you are tempted by, say, a free Apple TV+ subscription or whatever else they’re bundling.

Don’t forget there’s another option, too. Instead of buying a brand new phone outright, consider a refurbished phone. It’s not just better for your bank balance: it’s also better for the environment.