The reviews are in and everyone seems to agree that the new Galaxy S8 is the world’s best phone ever. (Take that, Nokia!) With that decided, we now turn our attention to the question that our worried spouses and accountants are asking: What’s the best way to buy the S8? Outright or on a contract plan?
For as long as smartphones have been in our pockets we’ve argued about this. It used to be that outright purchases were generally seen as the way to go. Even with telco subsidies there tended to be savings if you dodged a contract. But is this still the case today?
To figure this out, we’ll compare the total cost of ownership over 24-months, the standard length of a phone plan contract, and we’ll use Samsung’s RRP for the phones in the comparisons:
- Galaxy S8: $1199
- Galaxy S8+: $1349
Naturally, the upfront price will eventually fall over the lifespan of these phones - but if you want one right now, this is what you'll need to pay. Likewise, the monthly handset repayment fees may gradually become cheaper as the phones get older, but don't expect any discounts for the time being.
Let’s start by looking at plans with at least 10GB of data.
As you can see, the Minimum Total Cost for the contract phone plans start from about $2100 per month for plans with this much data.
If you take the cost of 24-months of SIM Only phone service costing $40 per month ($960) and add a Galaxy S8 handset, the total is $2159. With a Galaxy S8+, the cost increases to $2309.
So far, no clear winners based on price alone. There’s about $50 between the options, unless you choose Telstra — but you didn’t need us to tell you that Telstra was going to be the expensive option.
The equation changes if you look for cheaper SIM Only plans. The telco’s most generous subsidies are on plans in the $80 to $100 price range, so you end up paying more for the phone on the cheaper plans, making an outright purchase a better choice.
Basically, if you break down the cost of the Galaxy S8 handsets into a monthly price — the standard S8 is $49.95 and the S8+ is $56.20 — you can see how much you’ve got to work with. The cheapest Galaxy S8 plan is $72 per month (with 1GB on Woolworth’s Mobile) so if you choose a comparable SIM Only plan that costs less than $22 then you are saving money.
At this price, and with small amounts of included data, you should be able to find a SIM Only plan that saves you some money over two years. Decisions, decisions...
The high cost of new smartphone handsets and the surging popularity of high-data SIM Only plans have squeezed the savings out of this comparison. Regardless of which direction you go in, the maximum savings between the cheapest outright and contract options tends to be no more than about $100 over two years, or about $4 per month.
Minimum total cost isn’t the only consideration in this decision, of course. With so few dollars to save, the focus shifts more to a question of flexibility over convenience.
For as much as many hate two year contracts, this is the more convenient option. No four-figure upfront cost and manageable monthly repayments. It’s sort of like an interest-free loan that you’d get from an electronic retailer but with no scummy monthly “admin fees”.
If you’ve got the cash to drop, an upfront purchase gives you the flexibility to switch phone plans whenever you like. And, for as much as 10GB and data-free music streaming sound like good deals today, it’s hard to say what phone plans will look like in 24 months. You may as well keep your options open.
Speaking of data-free music streaming, it is also worth factoring in telco plan bonuses when weighing up your options too. You might be able to save $5 per month choosing one of the smaller telco service providers, but you will forgo added extras, like Telstra’s NRL, AFL and Netball sports streams, data-free Netflix with Optus or Vodafone’s awesome $5 per day international roaming. So factor in your personal interests and choose accordingly.
Joe Hanlon is Publisher at WhistleOut, Australia’s phone and internet comparison website. He’s been writing about phones and plans for far too long.
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