Considering buying a new phone? Understanding total actual cost of the phone may change your view of Contracts forever.
By answering just 3 questions, you can work out what the best mobile phone deal is for you, making sure you're getting the best value at a price you can afford.
“Life’s better out of contract”, use our calculator to show you which option is best for you - buying the phone up front "SIM free", entering into a Mobile Phone contract or via a short term loan.
Follow this step by step guide to answer just 3 questions and use our calculator to work out what you're actually paying and what you could save:
1) What plan do you need based on your usage? 2) How much can you afford to pay? 3) How much are you actually paying for your phone?
We’ll use this simple example as we go along (you can enter your own details in our handy calculator below) to illustrate the differences (as shown in above graph):
Cost of phone I want:
Can buy it £579 “SIM free”
How much do I use each month?
£10 goodybag per month - will be plenty
250mins, 1GB mobile internet, unlimited texts
How much can I afford per month?
- I have £40 to put towards phone now
- I can afford around £100 a month at a push
My loan options?
I have a credit card which has an APR of 13%
My contract options:
The phone I want is available on 24 month contract
- £40 deposit (upfront payment)
- £41 per month
1) How much are you using your phone at the moment, what plan do you need?
The mobile phone deal market is pretty confusing, with so many options to choose from we’re often overwhelmed by choice.
In order to compare apples with apples, the first step is to work out how much you’re actually going use your brand new phone – this way you’ll be sure your ongoing costs will be as expected.
Mobile Phone Contracts often include bundles of minutes, texts and mobile internet – which seem like they’re offering oodles of value, however unless it matches how you actually intend to use your phone it is just wasted money.
How much did you use last month? Start off by asking your current mobile provider how much you used your phone last month. At giffgaff we give all of our members a monthly summary of how they’ve used their phone to help them make a decision on which goodybag is best for them (to find your latest summary check your Newsfeed under My giffgaff or your email inbox for your latest Points/usage statement)
Will your usage stay the same? A newer smartphones will consume more mobile internet than your old one. You might find that with the iPhone 5 you are using twice as much mobile internet as when using iPhone 4 – more functionality, faster processing, higher resolution camera, watching more video etc you might want to factor in extra mobile internet usage
2) How much can you afford to pay?
Just like purchasing a house, the more you put down as a deposit the more you’ll save in the long run.
Purchasing the phone out right (sometimes called “SIM free”) typically is the cheapest option long term – but that isn’t an option for everyone.
Money Saving expert has some good advice for “low cost loans” including tools/calculators, plus advice for people with low credit score ratings. Use the calculator below to see how much to see how your different options work out.
How much deposit do you have? To help minimise your loan amount, the more deposit you can put towards your new phone the more you’ll save. Consider the value of your current phone, there are plenty of phone recycling companies Mobilevaluer.com is just one that you might want to check out.
How much per month could you afford? Short term pain should end up in long term gain. By paying larger chunks of your loan off earlier can save you loads in the long run. If you can afford more at a push.. use the calculator to see how much of a difference that'll make longer term.
Using my “New Phone” example – I can afford £100 per month, which means I could buy it on my credit card and pay off my phone within 6 months, which works out to be around £600 for the cost of the phone. Plus the bonus is that by month 7 my monthly costs drops down to just £10 per month (while my contract friends are still paying £41)
3) How much is your phone actually costing you
There are plenty of savvy giffgaff’ers are turning to “SIM free” handsets, paying full price for the handset up front as typically it works cheaper than being tied into a lengthy contract.
Within your mobile contracts you’re paying for the phone rental (which covers mins, texts, data usage) and also paying off the cost of the phone – so essentially they’re a short term loan.
Before you look to get a new phone - a couple of things to consider,
How much is the phone actually going to cost you in the long run? To calculate the total cost of ownership, multiple the monthly payments by the contract length and add in any deposits - that is the true cost of the phone. Use our handy calculator to do the job for you.
If you lost it/ broke it can you still afford the repayments plus the cost of replacement? Something to consider is phone insurance - walking around with something that costs that much, probably worthwhile protecting it.
Many thanks to geekcubed who has developed this calculator - this is version 1 - we intend to add a few more handy graphs.