Contract Phone or SIM Free: What’s the Best Deal?

by Sandra Henshaw - , Last Updated on August 21, 2014, Buying Guides

As most people probably know, there are two ways of getting the mobile phone that you want as well as phone service. You can opt for signing an incentive contract with your mobile company that will give you a phone and a calling plan, or you can buy a SIM free phone yourself and then sign up for just a calling plan with a mobile operator. Our question today is: what’s the best deal for you? If you’re wondering what’s the cheapest way to get your hands on that new mobile, then keep reading, because we’re doing the maths for you!

How This All Works

The first thing that you need to know is that any phone given to you by a mobile operator isn’t free. In some cases you’ll need to pay a small up front fee to get a phone, but in all cases you will pay for the phone in a more expensive bill. If you look at the price difference between a calling plan only contract and an incentive contract you’ll see just how much more you’re paying for your phone each month.

In order to figure out which is the best deal, we’re going to need to do some maths. It’s pretty simple to work out the complete cost of phone plus contract. In the case of a SIM free phone you multiply the monthly calling plan cost by the number of months in your contract (usually 24) and then add the whole cost of the SIM free phone. In the case of incentive contracts you simply multiply the monthly cost of the contract by the number of months in the contract, and add any up front fee for the phone if applicable.

Of course, to make a fair comparison, you’re going to need to ensure that you’re getting the same kind of calling plan limits with both contracts (i.e. a similar number of minutes and messages and an equivalent amount of mobile data). We’ve looked at some of the top phone models and some of the biggest UK mobile operators to figure out which method is best for you.

On the iPhone 5S

The iPhone 5S is one of the most desirable phones on the market, and we took a look at deals with O2. You can get the iPhone 5S 16 GB model on a contract with O2 that includes unlimited minutes and texts plus a massive 8GB of data for £48 a month, plus a one off payment of £19.99. Over the course of a two year contract that’s a total of £1,171.99. Not bad. That same calling plan SIM free with O2 will cost you £30 a month, whilst buying that 16 GB iPhone costs £549, for a grand total of £1269 over two years. That means that you save just under a hundred pounds by signing an incentive contract.

What about a different operator? With mobile operator Three the best deal is on a plan that gives you your iPhone plus 600 minutes and unlimited texts and data for £38 a month plus a one time £9 fee. Over two years that adds up to £921. The same calling plan without a phone will cost you £18 a month, plus the full cost of the phone (£549), giving you a total of £981 over two years. Once again, you save £60 by going with an incentive contract.

For the Samsung Galaxy S5

What about one of the hottest Android’s around? The Samsung Galaxy S5 is available from Vodafone for just £38.50 a month and no money down on a plan with unlimited minutes and texts and 1 GB of mobile data, costing a total of £924 over two years. The same calling plan without a phone costs £22 a month, which when you add in the £549 cost of the S5 gives you a total of £1077 over two years. Going with the incentive contract saves you over £150.

Let’s test it again, this time with Virgin Mobile. The Galaxy S5 plus unlimited texts and minutes and 2 GB of data costs £37 a month plus £99 up front. That’s a total of £987 over 24 months. The same calling plan is £15 a month, plus the whole cost of the phone, which comes to a total of £909. Hmm. Our first case of going SIM free being cheaper than going with an incentive contract. This is fairly unusual, and shows that it’s definitely worth doing the math!

For the Sony Xperia M

Let’s give this one last shot, and this time we’re looking at a more budget friendly model, the Sony Xperia M, a decent low to mid range hand set. With O2 you’ll get the Xperia M for no cash up front on a plan with 500 minutes, unlimited texts and 500 MB of data for £18 a month. That’s a total of £432 over two years. The same calling plan with no phone will cost you £11 a month, plus the £149.99 price tag for the phone, for a total of £413.99 over two years. Ah, going SIM free comes out just a little cheaper again…

Maybe a different operator will help? With Three you’ll get the Xperia for nothing up front, plus unlimited texts, 600 minutes and 1 GB of data for £19 a month, coming to a total of £456 over two years. The same plan with no phone is £10 a month, plus the cost of the phone, giving a total of £389.99. And again, SIM free is coming out cheaper…

What’s Going On Here?

It’s difficult to make a hard and fast rule about whether incentive contracts or SIM free contracts are cheaper, and it’s absolutely always worth doing the maths yourself for the phone that you’re looking for. In general, we tend to find that expensive devices (i.e. flagship phones and top end mobiles) are usually cheaper on incentive contracts. On top of this, the larger your calling plan is that you get with your phone, the more you’re likely to save.

For budget phone models, this is less true. In general you’re better off going SIM free if you’re looking at getting a cheaper phone.

The take home message here? There’s two. First, if you’re looking at an iPhone or top end Galaxy or even HTC M8 then it’s probably worth going with an incentive contract to get one. Second, always go through the figures yourself before signing, just to make sure!

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