Is it more profitable to buy a phone by contract or directly?

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If a cell phone is on your wishlist this holiday season, you might be wondering whether to buy it direct or go for a plan. Our articles are dedicated to helping you find the best product at the best price. For sharing this information and making a purchase, we may receive compensation through affiliate partnerships and advertising. Find out more. According to data from IBISWorld, Australians will spend $ 10.4 billion on smartphones and tablets over the next five years. Buying a phone for a family member or upgrading to a newer model for yourself might be on your wishlist.

“Every plan you have to pay for is a rock on your back. When you have a lot of stones on your back, it’s quite difficult to walk. With that in mind, here are some of the key considerations if you are planning to buy a mobile phone and want to know if a plan or direct purchase would be best for you. What’s the difference between buying a phone directly and buying a phone with a plan? According to IBISWorld’s study of cell phone sales in Australia, the two main ways consumers buy cell phones are directly from retailers such as appliance stores, department stores and supermarkets, or in the framework of long-term contracts with telecommunications operators such as Optus, Telstra and Vodafone. .

You might be wondering whether to put the phone on a plan or contract and pay for it in installments, or buy the phone directly from a retailer and choose a SIM-only plan. Both options have their pros and cons and may be right for you depending on your budget and what you need in a mobile phone. Key advice from financial expert Vanessa Stoykov is to make sure, whatever option you choose, to purchase with intent this holiday season rather than racking up debt. “We try hard to give freebies to everyone and most of the time that leaves people with a huge hole in their budgets, and credit card or buy now pay the debt later to pay things off.” , said Ms Stoykov.

People who buy their phone directly from the Apple Store or their local Woolworths, for example, can then purchase a SIM plan only from the phone company or other service provider of their choice. If you choose to buy your phone on a plan from a carrier, contracts typically run for 24 months and give you access to the carrier’s networks and a certain amount of data to use, as well as ownership of the actual phone. Ms Stoykov said the choice to buy a mobile phone with a plan or directly should depend on who it is for and what is best for the individual. “I think for a business’s cash flow the plan option works, or if you’re someone with a good steady income,” she said.

The plan’s long contract duration – which is typically 24 months, but can also be 12 months or up to 36 months – allows people to spread the cost of the phone and avoid paying a hefty sum of money. money, which is why they can be attractive. IBISWorld’s research found that consumers who are looking for low-cost phones (other than smartphones) to use with alternative or prepaid providers are more likely to purchase products directly from retailers. If you can afford the upfront costs, it may be cheaper in the long run to buy a phone if you can find a cheaper and better value SIM plan from a smaller service provider than you can afford. be available with a postpaid plan. or contract.

She explained that if you’re buying the phone for your teenager, having them on a SIM-only plan might be a better option since they have a limited amount of data that they have to measure and budget for throughout the month. “It’s about teaching them to budget, to plan and to be good with money,” she said. Ms Stoykov said it’s also important to take into account how much storage you actually need in a phone and specifications like camera quality and other special features when deciding how much to buy. spend. According to IBISWorld, most people tend to buy smartphones with a plan because they are usually expensive to buy directly.

But if you prefer the installment payments that come with buying a phone with a plan, the plans can save you money over the cost of the phone, but it often ends up costing just a few pennies or dollars less. than buying the phone outright, assuming you don’t incur any additional costs along the way. Then you need to factor in the cost of the actual plan to use the provider’s service which is billed in addition to the phone reimbursements each month.

Looking at the two most popular phone providers Australians buy from – Apple and Samsung – here’s a look at the current price difference between outright buying the iPhone and Galaxy S21 or on a plan of some. major telecommunications operators. Prices do not take into account any discounts that may be available if you trade in your old phone, nor any additional costs such as insurance or product maintenance costs. If buying a phone directly or with a plan seems too far out of your budget at the moment, buying a used mobile might be an option to consider.

In fact, IBISWorld has found that consumers are increasingly turning to buying used or cheaper cell phones. “My kids are always looking to buy used handsets and have sold some of their phones to other kids,” Ms. Stoykov said. If you prefer a new phone, it may become more affordable. IBISWorld researchers expect increasing competition between carriers and telecom operators to lower smartphone prices over the next five years. Big hike in cell phone prices you need to know about.

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  • Is it more profitable to buy a phone by contract or directly?
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