Buy Now or Pay Later: the best way to own your new phone

There is a commonly held opinion that people who buy phones outright (Buy Now) and then choose a cheaper SIM-only plan come out well ahead financially over those who sign two-year contracts (Pay Later) with one of the major telcos; but is this really the case?

Ultimately, when you 'Buy Now' you could pay more for the phone itself, but save money each month on your plan, while a phone on a contract is sold cheaper, but you are locked into a comparatively expensive plan. So, who comes out ahead over the long run?

Let’s take a look at a few of popular examples. We'll include an average amount of calls, SMS and data, then see how much each option costs over 24-months.

Samsung Galaxy S5 16GB + 300 mins calls, 500 SMS, 1.5GB data

The Pay Later price includes the price of the phone through Harvey Norman ( $896), plus 24-months worth of month-to-month service through the indicated provider.

Buy Now Phone + closest plan	My Plan $65	Red Plan $65	Large Casual $95	BYO $80	Power Plan 18	Unlimited $39.90	ULTD $40	Liberty Hero
	$2456 Min total cost	$2456 Min total cost	$3176 Min total cost	$2816 Min total cost	$1328 Min total cost	$1853.60 Min total cost	$1856 Min total cost	$2099 Min total cost
Pay Later Phone and plan on contract	My Plan $60	Red Plan $65	Large $95	Plan $90
	$1896 Min total cost	$1896 Min total cost	$2424 Min total cost	$2016 Min total cost

Apple iPhone 5s 16GB + 300 mins calls, 500 SMS, 1.5GB data

The Pay Later price includes the price of the phone through Apple's online store ( $869), plus 24-months worth of service through the indicated provider.

Buy Now Phone + closest plan	My Plan $65	Red Plan $65	Large Casual $95	BYO $80	Power Plan 18	Unlimited $39.90	ULTD $40	Liberty Hero
	$2426 Min total cost	$2426 Min total cost	$3146 Min total cost	$2786 Min total cost	$1301 Min total cost	$1826.60 Min total cost	$1829 Min total cost	$2069 Min total cost
Pay Later Phone and plan on contract	My Plan $60	Red Plan $65	Large $95	Plan $90
	$1896 Min total cost	$1896 Min total cost	$2424 Min total cost	$2160 Min total cost

As you can see, there isn't a great deal of difference between the price of a new Galaxy S5 and an iPhone 5s. What if we take a look at an older phone with a cheaper retail price?

Samsung Galaxy S4 16GB + 300 mins calls, 500 SMS, 1.5GB data

The Pay Later price includes the price of the phone through Dick Smith Electronics ( $668), plus 24-months worth of service through the indicated provider.

Buy Now Phone + closest plan	My Plan $65	Red Plan $65	Large Casual $95	BYO $80	Power Plan 18	Unlimited $39.90	ULTD $40	Liberty Hero
	$2255 Min total cost	$2255 Min total cost	$2975 Min total cost	$2588 Min total cost	$1100 Min total cost	$1628 Min total cost	$1628 Min total cost	$1868 Min total cost
Pay Later Phone and plan on contract	My Plan $60	Red Plan $65	Large $95	Plan $90
	$1440 Min total cost	$1560 Min total cost	$2280 Min total cost	$2160 Min total cost

Verdict

While it might seem straight forward, you do very well in this situation to shop around and do a little bit of maths (or let us take care of that for you with our comparison engine). It is always much cheaper to buy the phone on contract through the major telcos themselves, but not so much if you mix-and-match with a SIM-only provider, like Vaya.

There are a few other things to consider, of course. You have to know which network the small SIM-only providers use, for example. There's no point picking up a Vaya SIM card if you get terrible Optus coverage at home or at work.

There's also the price of the phones themselves and whether you can afford an upfront purchase. We've used major electronics retailers in our equations above, but you can almost certainly save money if you are happy to buy through a grey importer, like Kogan or Mobicity. You might forgo a manufacturer's warranty if you choose a grey importer, but it'll be up to you to decide whether you prefer the risk or the reward.

Joseph Hanlon

Editorial Director | X | LinkedIn

Joe Hanlon has been immersed in mobile phones, plans and the internet for over a decade, having written for publications like CNET, Techradar, Gizmodo and Lifehacker. He steers the editorial ship and makes sure that we are always serving up the most useful guides and recommendations. If you ever bump into Joe on the street, don't be afraid to ask for a phone recommendation. It's embarrassing how much he enjoys talking about this stuff. He also loves listening to podcasts, so feel free to email Joe with recommendations.

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