Buying a new phone on a plan could be more manageable for your budget since you can pay the phone back in interest-free instalments over 12, 24 or 36 months.
Overall, it's still cheaper to buy your phone outright if you can afford it.
Buying a phone on a plan means you'll be tied to a mobile plan from a major telco that typically charges higher mobile plan prices, rather than having the freedom to compare more SIM only plan choices if you buy your phone outright.
Buying a phone outright vs on a plan: How does it work?
There are 2 main ways to own a mobile phone in Australia.
Buying outright: This simply means you pay for the phone upfront. It doesn't come with a mobile plan so you'll need to get one yourself or use your existing plan for the new phone. Options of retailers to buy a phone outright include the brands themselves, such as Apple or Samsung, and retailers like JB Hi-Fi, Amazon or The Good Guys.
Buying a phone on a plan: You'll pay for the phone in monthly instalments from a telco such as Telstra, Optus or Vodafone. On top of the phone repayments, you'll need to sign up for one of their SIM only mobile plans and choose a repayment period between 12 and 36 months.
Is it cheaper to buy a phone outright or on a plan?
It's almost always cheaper to buy a phone outright.
There may be a few fringe cases for existing telco customers who may be offered a discount for renewing their phone plan and upgrading to a newer phone model, in which case, you might be able to save a bit on the RRP of the phone.
But otherwise, paying for your phone outright and upfront is usually cheaper because you're not tied to a comparatively expensive phone plan from one of the major telcos.
Let's take the first major phone of 2024 as an example and ignore any phone discounts (just for now).
Pair the S24 Ultra with a phone plan from Telstra. You'd be paying for the phone in monthly instalments over 12, 24 or 36 months. On top of that, you'll be paying the cost of its monthly SIM only plan. For this example, we've chosen the cheapest option – $62 a month for 50GB.
Or you can buy the phone outright for $2,199 and sign up to a SIM only plan with Belong, which runs on Telstra's wholesale network. For this example, we went with its 25GB plan which costs $29 a month. Considering the average Australian uses 12.8GB per month, this plan should suit most people.
Here's a look at how costs can vary between buying outright vs on a plan:
As you can see, the difference in costs increases the longer you stay on a phone repayment plan.
You'll end up paying between $396 and $1,188 more if you choose not to buy outright – this is because Telstra's plan costs more than Belong's (though you do get more data), since the price of the phone doesn't actually change.
Some things to keep in mind with the above calculations:
SIM only plan prices from Optus and Vodafone start at $49 a month so the cost difference between a phone plan and buying outright will be less compared to Telstra (between $240 and $720 in savings).
We've used Belong in our example but you can get an even cheaper mobile plan depending on your data and network requirements.
Buying outright may be cheaper but it's not always easy to part with big money upfront, especially if you're opting for a premium handset. Make sure you do what's best for your budget.
Do phones cost more on a plan?
Phones cost the same whether you buy outright from a retailer or on a plan from a telco. Telcos will charge you the original RRP of the phone.
However, similar to retailers that sell them outright, you could find yourself getting a discount on the actual cost of the phone. They may even throw in some bonus gifts such as a free smartwatch.
Pre-order periods for new phones are usually one of the best times to take advantage of such deals.
The main caveat is that oftentimes you'll need to stick to the phone plan for 12, 24 or 36 months to take full advantage of the discount. Leaving early may result in some (if not all) of your discount being forfeited.
A couple of years ago I purchased a phone on a plan because I was getting a really good discount on the cost of the phone itself. I've now been tied to Vodafone for 24 months, with another 12 to go. Because I live in Sydney, Vodafone's coverage hasn't bothered me too much. However, I've suffered from spotty to no reception during road trips around regional NSW. I also can't cancel my Vodafone plan because the discount was offered based on the condition of my signing up for the 36-month plan. This is all to say, if you do get a phone on a plan from either Telstra, Optus or Vodafone, make sure their coverage works for where you live.
Is it better to buy a phone outright or on a plan?
Our verdict: The decision to buy outright vs on a plan will come down to your personal circumstances. If you're comfortable spending the money upfront, it'll work out cheaper to buy the phone outright.
However, it could be easier to pay in instalments if you don't want to spend a large chunk of money upfront, especially if you're eyeing a premium handset that can cost over $2,000+.
Here's a quick rundown of the pros and cons:
Buying on a plan
Payments are more manageable as they're spread over 12, 24 or 36 months.
Discounts and bonus gifts are often offered by telcos, especially during pre-order periods for flagship handsets.
Major telcos sometimes give more perks on their mobile plan compared to smaller providers.
There's no lock-in contract, so you can pay off the cost of your phone and leave the plan whenever you want.
More expensive in the long run as mobile plans from Telstra, Optus and Vodafone are pricier.
Your options are typically limited to just the major telcos if you're looking at getting a new flagship phone like the Samsung Galaxy S series or an iPhone.
Discounts may also be available during sale periods.
You can switch mobile plans whenever you want.
May be expensive to pay for upfront.
Discounts and bonus gifts may vary to what telcos offer on a plan.
Did you know?
According to Finder's Consumer Sentiment Tracker, more than two-thirds (69%) of Aussies upgrade their phone due to performance issues. 15% felt their phone was too slow, 12% experienced total death of their battery and a further 12% said their battery life was poor.
Other reasons included their contract coming to an end (8%), seeing a new phone they liked (7%), being offered a new phone by their telco (6%), getting a hand-me-down (5%) and losing a phone (2%).
Why you can trust Finder's mobile plan experts
We've done the work
We've researched and reviewed hundreds of phone plans to make our guides as helpful as possible. Our experts can be seen across TV, print and digital media.
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Since 2015, we've helped over 1.2 million people find the right mobile plan by explaining features clearly and simply. We're here to help you make a decision.
Mariam Gabaji is an editor and tech and utilities expert at Finder with over 11+ years of experience in print and digital media. Her main goal is to help households cut through the industry jargon and save money on their household bills. Her expertise is often featured in media including the ABC, Yahoo Finance, 9News, 7News, A Current Affair, The Guardian, SBS and Money Magazine.
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