The Case For Contract Phones
Should we buy our handsets outright, on contract, or not at all?
I’m in the market for a new phone, but as part of a drive to reduce outgoings I recently kicked the contract and went SIM only. I wondered what the financial difference between buying the handset outright and taking out a new contract would be, and the answer isn’t quite what I thought.
The rise of the Android and iPhone Loop Disease
The rise of the Android is probably a bad title, as according to www.expandedramblings.com the system has over two billion users and 85% market share of market devices worldwide. As an avid iPhone user and self confessions legacy Apple addict, this really surprised me. Those who have been a fan of Android appear to have been since its inception in 2008.
What would be more accurate to suggest is that today more people like me, i.e those who have always discounted Android options, are considering a move away from the iPhone. For me, it’s been something I’ve been considering for a while. Generally, I’ve just been feeling a lack of excitement for things coming out of Cupertino over the last couple of years. Both my iPhone and iMac's haven’t impressed me as they have in years gone by, and as I wander into my mid thirties I’m becoming more and more interested in the longevity of the products I buy, and have been asking myself if the premium for “premium” items is actually worth paying.
Recently, my iPhone 7 developed what the internet has dubbed, “iPhone Loop Disease”, where it’s functions generally degrade over a short period of time and leave you with basically a small Safari reader, as all audio functions cease, boot times exceed five minutes and it eventually gets stuck on it’s boot up screen forever. This, along with a smashed screen and the release of Huawei’s P30 Pro made me finally decide to investigate what Android had to offer.
The Huawei P30 Pro
The latest offering from Huawei is making waves on the internet, principally due to the device’s amazing camera features that have supposedly been developed in collaboration with Leica. Go on YouTube and you can watch dozens of videos giving you the latest shootouts between the P30 Pro and other flagship devices such as the iPhone XS Max and the Galaxy S10+, trust me — I have. Like any device, beauty is in the eye of the beholder not just for the aesthetics, but also for the phone’s features, and the output of it’s camera.
For me, the ultra wide angle, stunning low light capability and in app professional features had me wide eyed and eager to make the switch. Over the last few years(while I’ve been sleeping it seems) the cameras in Android phones seem to have rapidly outpaced that of Apple’s iPhones. Whilst I get the impression iPhone users still like the look and feel of IOS, and perhaps won’t appreciate the apparent clunkiness of the Huawei OS, I’m at a point where I’m ready to look past that in order to be able to get the photography results that I want, without having to carry either a pro camera, or a bag full of add on iPhone lenses.
For these reasons, and the general “I feel like a change” factor, I’m ready to make a swap. The question is, how much is it going to cost?
Money Money Money
Over the last two years our family’s approach to money has drastically changed. A couple of years ago, I’d be writing this article about how I’ve just got a new contract P30 Pro, and how excited I was to have a new phone. Not now though. Now, we put much more thought into how we pay for things like devices, which are essentially luxuries, and also if that cost is really worth it.
In a move to try and eradicate debt and get outgoings as low as possible, both my wife and I fell off the bus of automatic iPhone renewals a year or so ago, I’m on a 7 (which has just died), and she’s on a 7 plus. The result of that is that our monthly contract outgoings went from nearly £80 a month (about $102) to £31 ($40). The P30 Pro to buy outright is, £899 ($1150) so there are two questions, firstly — Do I want to drop the best part of £1000 on a new phone, and two, is doing so actually cheaper than taking out a contract?
The last year we’ve been fairly hard-line, things like contract phone upgrades are something we’ve classed as debt, and as such aren’t welcome in our house, but if taking out a contract is cheaper, doesn’t logic say it’s the right move? Here’s our thoughts.
Do You Actually Want It?
Over the course of our debt reduction journey I’ve been struck by the fact that when we want something, the image in our mind of that thing’s impact on our life is actually much bigger than it is in reality, and therefore we don’t actually want these things nearly half as much as we tell ourselves. When it comes to a new phone in particular, its easy to get carried away. Even though I need a new phone, do I need one that is nearly £1000? The obvious answer is no, of course I don’t. I could make do with a functioning iPhone 7 just fine, as I have been till mine became unworkable.
If you are in a position to spend the money though, and you want to, then that is of course fine, but the big thing to remember when looking at the numbers, is that if you decide one course of action is “cheaper” than another, it is only the case if you’re happy with such an expensive outlay.
What The Numbers Say
So when you look at my example, how to the numbers come out? Here’s what I found based on prices from my current provider and the listed price of a new P30 Pro, also these numbers are predicated on a two year deal.
Option 1 — Outright Purchase
Unlimited Calls, Unlimited Texts, 30GB Data — £15 a month for 24 months = £360 ($460)
Purchase of Huawei P30 Pro= £899 ($1150)
Total cost = £1510 ($1931)
Option 2 — Two Year Monthly Contract
Upfront Cost = £79($101)
Monthly Cost = £51($65)
Total Cost = £1303 ($1667)
So there you have it, in terms of total cost, the contract deal is actually cheaper. I must admit I wasn’t expecting this, I was expecting it to be significantly more expensive to take out a contract phone, principally based on experience of disproportionate interest on debt. How the phone companies manage to get it to be cheaper I don’t know, I guess it has something to do with sales volume and the profit of long term repeat customers, but who knows.
So I guess I’ll go ahead and order then? Not quite. Despite the knowledge that the contract deal is cheaper, it still makes me uncomfortable. The idea of increasing our outgoings by a decent amount, just for a new phone leaves me feeling like we’ve gone backwards.
Despite knowing that it is in fact cheaper to get the contract deal, what the exercise has helped me do is think about it from a different perspective. The truth is, I’m not about to drop a thousand bucks on a new phone, and as I don’t want a new contract, I guess I’ll just have to either go without, or save up. Now, this is a new phone, but the mindset applies to everything we buy. It is so quick to get sucked into payment plans and finance agreements for things that really, we should be paying for outright.
Fundamentally, the question isn’t really about what is the best way to afford to buy a new phone, car or house, but instead — can you really afford to buy it in the first place?
Father | Husband | Rescue Pilot | Futures Trader | Driven by family, flying, and the journey to realising goals.