Buying A Mobile Phone Outright – Will I Save Money ?

Buying a mobile phone outright - Will I Save money ?

You’ve got to do the maths to work out whether it’s better to take a contract from your phone company or to buy the phone outright and add a SIM later.

Here’s How to Save 30% On A Mobile Phone Contract

If you buy your own phone and get a SIM Only plan there’s a chance you’re going to save a substantial amount of money on your phone bill
over the next 2 years. Better yet, when you know the inside story, you’ll still be able to get access to the Network of the phone company you love – Vodafone, Telstra or Optus for a price which is less than you’re used to paying.Do you have your own phone ? Are you are buying a new phone or picking up a second hand mobile phone? 59% of Australian these days do one of the two. Phone buyers are taking advantage of the market to save substantial amounts of money. The majority are choosing a SIM Only plans or a prepaid plan deal and piecing things together themselves to save money.

To figure out if buying a phone and adding a SIM only plan makes sense for you, you need to understand a little about how the value of the deal is calculated. Here’s how you can do it yourself.


Another example

It makes sense to compare a variety of devices ( phones ) and a variety of plans. We’ve got a couple examples here of Apple’s major 2016 product release which allows us to make an important point. Over time, telcos are adding more and more data to their plans : For new customers. Existing customers, those under contract don’t get the benefit of the improvement.

In the year separating those phone launches, things change. Vodafone’s data inclusion doubled. Remember, if you’d bought the Galaxy S5 at the time it was launched, in mid 2014, your plan would include half as much data. If you bought the Galaxy S5 yourself and added a plan to it, not only would you have saved money, you could have moved to a plan with more data, without penalty, after a year and got twice as much data for the same price.

 So how do you do it ?

The process to follow to save up to 30%

You have a couple of fundamental options when you’re choosing a phone. In our view, only one makes sense for the vast majority of users.

  • Option 1: You can buy your phone outright and add a SIM Only plan to it:
    Whether you buy the phone new or second hand, typically, you’ll save around 30% of your total costs over a 2 year period doing it this way. What many people don’t realise is that if you choose an MVNO ( that’s a Mobile Virtual network Operator ) you can get access to the same network that Telstra, Optus or Vodafone will sell you, for far less money. By using their plans ( we have a few recommendations below ) and your own phone, you’ll save a fortune.
  • Option 2 : You can take out a contract with one of the major phone companies:
    Optus, Vodafone or Telstra. They’ll charge you 30% more, very often for access to the same network. There is no such thing as a free lunch or a free phone. When you take out a contract with one of the major phone companies, you have to cover all of their costs. You’re also tied in with them, whatever happens, for the next 24 months.


Getting the SIM from the right place

When it comes to buying a mobile phone yourself the key to success is focusing on the total costs you’ll incur over the time you own it. We recommend the following plans. We suggest you consider your own usage behavior and use that to determine whether these plans are right for you. Remember, you can choose to access the Telstra, Optus or Vodafone mobile networks with these MVNOs. Below on this page are some recommendations on how you can save money buying a second hand mobile phone.

Just look at the difference the right SIM Only provider can make.

Some SIM Only providers are MVNOs

How can MVNOs save you money

MVNOs save their customers money by leasing network access ‘in bulk’ from the three, major Australian phone companies. Then they sell it, to customers like you, at a significant discount.

With MVNOs, you can take advantage of lower rates, and SIMs that are contract-free.  They almost always offer better deals than the major phone companies. They don’t have the same marketing spends to pass on in the costs they charge you. They don’t spend nearly as much on advertising their brand as the others. By keeping their business models simple, they reduce the support costs and pass the savings on to you. They also need to charge less because they’re not as well known as their multinational competitors.

By keeping their business models simple, MVNOs reduce the support costs and pass the savings on to you in their SIM Only plans.

It’s important to realize that the network coverage component of the ‘product’ the MVNOs sell is very often exactly the same thing being sold by Optus or Vodafone. The coverage you’ll get from an Optus MVNO is exactly the same as the coverage you’ll get from Optus itself. There are a few exceptions and ‘gotchas’ to think about. We’ve covered those in detail, below.

Optus Network or MVNO Comparison


Myths about MVNOs: Prioritization

Some shoppers suspect that MVNOs are getting low quality network bandwidth. For example, minutes that aren’t used by carriers during peak activity. That’s just not true.  In many ways, network access is like electricity. It’s a utility which is the same whomever or whichever company you buy it from. You will not get a lower priority on the network if you go with an MVNO.

Why are MVNO deals cheaper?

The MVNOs marketplace is highly competitive. The competition is focused where you want it. MVNOs have an agreed charter with the major phone companies. Each MVNO is set up to focus on servicing ( selling to ) a particular segment.

A segment is just a group of users. Here are a couple of our favorite MVNOs and the segments they are designed to address.

Additional benefits of buying outright include:

  • You are not tied in to a contract:
    If you choose a SIM Only provider and something about the service you are getting (coverage is not what you need where you need it, a rude customer service representative) does not meet your expectations, you can very quickly change your mind and get out of the agreement you’re in. Compare that to being tied in to a contract with Optus for 24 months!
  • Flexibility to upgrade:
    Since you’re not in a contract, you decide when you get a new phone, not them. If it’s not important to you to have the latest phone, you don’t have to. Not everyone is an ‘early adopter.’ In fact, with a collection of pretty lack luster phone launches over the last couple of years, having the latest phone is not everything it used to be!
  • Move to the best deals:
    If a new provider offers a better deal as an incentive to joint up, then join them. This way, you will always have the peace of mind that you would not be doing better if you went elsewhere. New MVNOs / resellers launch from time to time. Companies have sign up deals which you might enjoy. Your circumstances might change and you could need more – or less from your telecommunications provider. For example, you might need more data and change provider to get the best data deal. MVNOs and SIM Only providers allow you to move around without commitment.

When does it make sense to buy under contract ?

As a general rule, it makes sense to buy your phone outright and get your own SIM. However, if you are one of these types of people, you could be better off buying your phone under contract from one of the big phone companies.

  • Can’t cover the upfront cost yourself:
    If you have more money available to you, convenience can become the most important factor. For those prepared to pay a few hundred dollars more, buying your phone under contract means you don’t have to worry about shopping around. If you don’t have the money, your options may be limited to phone companie’s contract deals, whether or not they make financial sense over the course of the contract.
  • The maths doesn’t work:
    Sometimes, for promotional reasons, the bigger phone companies drop their pants on pricing and attempt to increase market share through aggressive acquisition programmes. To you and me that means they cut their price to sell more. These periodic price wars are great for consumers. They also muddy the waters of buying your phone outright and the trends underlying the nature of telco behaviour in the last few years. It doesn’t always make sense to buy the phone outright, as the following example shows.

Even better value – second hand mobile phones

You’d do it with your car. You’d do it with a pair of skis. Why not do it with a smart phone ? With the rate of change growing ever faster in technology releases, perhaps it’s only natural that some people are taking advantage of some ‘tried and tested’ or ‘pre loved’ Smartphones.

There are plenty of them around. The major telcos ( Optus, Vodafone Australia, Telstra, Virgin Mobile ) all get returns from their Australian customers from a variety of sources.

Where do second hand mobiles come from ?

  • eBay:
    The most common place to get a second hand mobile phone is eBay. Last year, eBay sold and resold more than $2bn of Apple’s products.
  • Family members:
    There is usually a family member who loves the technology that’s around and has an old phone to hand down to a not so lucky sibling.
  • Insurance claims:
    When you break your device, it’s refurbished. You might get a replacement device sent to you from the telco or they might repair yours.
  • Network Coverage Guarantees:
    The telcos are obliged by law to provide you with a guarantee that their network will provide you with a service. All the telcos offer some form of ‘Coverage Satisfaction’ assurance – they have to ! If you have dodgy coverage in your home area or somewhere else you spend a lot of time you have every right to return these mobile phones to where you bought them. You’ll get a refund ( you’ll probably be charged for the calls you made and the data you used ) and then you part company.
  • ELF / DOA mobile phones:
    ELF mobile phones are Early Life Failure mobiles. That means that they ‘break’ in the first 30 days through no fault of the owner. Again, legally, they can be returned to the telco you bought them from. DOA’s don’t even make it to the first 30 days. They are Dead On Arrival and returned by the user.

Apart from the obvious environmental benefits of reusing these products, they fill a gap in the market and offer an opportunity for some users to get a great value way of experiencing the benefits of a Smartphone.The way these returns are dealt with varies according to the phone companies you’re with but many are refurbished, and sold. Sometimes they are sold overseas, sometimes to an Australian company which buys them in bulk and sells them on. A proportion end up sold in Australia as second hand mobile phones.

Who uses second hand phones ?

  • Anyone and everyone:
    These days, there is no cut off to the type of person using a second hand phone. Once upon a time, each release of a new iPhone contained an incredible leap forward in features and functions that meant people had to have the latest. Now, any family member can get a hand me down phone and not be too bothered about it. Many offices have a desk drawer full of phones and new recruits are given one.
  • Price sensitive users:
    $100 is $100 but $100 means a lot more to some than others. For many, getting access to a mobile phone which might be a few months old but which still has a lot of use in it, for a substantial reduction on the initial purchase price makes sense.
  • Low requirement users:
    Slightly older people and / or those who are not that tech savvy do not, in many cases, place the same value on having the latest, hottest Smartphone features to them. These people can get a bargain with a device they get hold of second hand.

Why 2nd hand make sense – especially 3G phones

One of the major benefits is that ( once they’re unlocked ) they can be used with a SIM only plan. SIM only or BYO plans from the carriers might have the same or similar ‘cap value’ in them but the value you get is much, much more. Since you’ve bought the mobile phone you want outright ( or even been given it ! ) the telcos don’t have to charge you for it in the plan contract you take. The fact is that the best plan deal you will get at a given price point is almost always the SIM only plan or a prepaid plan for this very reason.

Additionally, many older mobile phones, those available on the second hand market are 3G. 3G networks are often fast enough for users with that sort of phone. If you’re not the sort of person who likes to buy the latest and greatest piece of technology, a 3G phone is likely to be fine for you. The tier 1 telcos – Optus, Vodafone and Telstra no longer sell 3G services on their network. You HAVE to buy a 4G enabled plan from all of them.


This Month’s Hot Offers


Summing Up – Buying Outright – does it make sense?

Most people find buying a phone a strenuous process. There’s a reason for that. There are a lot of moving parts and, to a degree, the big phone companies like it that way. For years, Optus, Telstra and Vodafone wanted to lure you in to buying a phone under contract from them. By tying you in for 2 years with a piece of hardware they ultimately owned, they knew you wouldn’t leave for at least that period.

These days, following international developments, mostly in the USA and mostly led by T-Mobile’s ‘Uncarrier’ programme, the landscape is moving on. Phone companies overseas and over here are focusing on what they do best. They want to sell you ‘airtime’ – an industry term for voice minutes, GBs of data and other network services. They’re less interested in offering interest free loans on the phones they sold you ( which is effectively what they were doing ) and / or subsidizing a handset it’s cost so you could afford it. There are exceptions to the situation : times when buying outright and adding a SIM won’t save you money. As we discussed above, situations in which they’re trying to drive sales by lowering their price muddy the waters.

However, most of the time, if you buy the phone yourself from somewhere like Kogan / eBay and add a SIM yourself ( whether is’s a SIM Only or Prepaid Plan ) you’ll save money. And the benefits are not purely financial. Managing the deal yourself in this manner gives you the control to move telcos, to pick better deals as they become available. If you have the money, you can upgrade mid term – every year if you want to. As phone companies, MVNOs or major tier 1 telcos add more data to their plans for new customers, you can take advantage of the situation.

The sole requirement for benefiting from the deal is an understanding of how to piece the deal together.


See all SIM Only plans

If you need another network, for example you’re after an unlimited plan with Telstra coverage, or you live in a city and you’re happy with Vodafone, you might like to check our SIM Only Comparison page and compare all the plans ( including every one mentioned on this page. )




Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.