Buying a Phone Outright or on a Plan: Which Is Better?

If you’re keen to get your hands on a new phone, which is the best way to go about it? Should you fork over a hefty sum of cash all at once, or split up the cost with monthly repayments? Canstar takes a look at what you need to know about purchasing your new phone outright vs. on a plan.

Buying a phone outright

Buying a phone outright is pretty straightforward. You buy the phone, and then are free to choose a plan (and even provider) of your choice. This is a great way to get an excellent deal, as you can buy from a wide range of retailers (such as electronics retailers) and not just telcos, which might net you a better price.

Plus, you are free to shop around for the best phone plan, instead of taking whatever is on offer as part of a plan deal. Not to mention you won’t have to lock yourself into a long contract, so you’re free to jump around plans whenever better deals arrive.

Of course, the one big downside is that not everyone has $2000 handy for a new iPhone 14, let alone half (or even a quarter) of that for something cheaper. Which is where a plan can help.

Buying a phone on a plan

Buying a phone on a plan involves splitting the cost of the device up over several months on the condition that you take out a phone plan with the telco provider.

For example, as long as you agree to this $60/month phone plan, we’ll let you pay off your new iPhone over two years.

Whether or not this is a good move is a little more complicated to answer. It can certainly make the cost of a new phone more manageable and, depending on the deals on offer, it may even net you a better price. But it does come with some restrictions and caveats, and there are several considerations to make:

Is it interest-free?

Generally, telcos offer the option to split payments over 12, 24, or 36 months, interest-free. So you don’t have to worry about paying for the privilege, like you do with other forms of finance, such as personal loans. But always double-check. You don’t want to be paying more than you need. Likewise, in addition to interest costs, are there any hidden fees or extra charges to know about?

Be sure to read the fine print.

What are the terms?

What happens if you want to break your contract early, change to a different plan, or if you want to upgrade your phone again in the near future?

Furthermore, what happens if your telco rejigs its offerings?

For example, let’s say you’re on a $60/month plan that gives you 12GB of endless data. If your telco reduces the cost of its 12GB plan to $50/month, or if it increases its $60/month plan’s data allowance to 20GB of endless data, which of those new plans will you be on?

Or are you stuck with the original deal you signed up for?

Is there a discount on the phone?

Most of the time, there’s no discount offered for purchasing on a plan. Your monthly repayments simply come to the same total as the sticker price. You can pay $2000 now, or $83/month for two years.

However, some telcos may offer discounts on certain devices.

For example, following the release of the iPhone 14 line-up, Skinny mobile discounted the iPhone 13 Mini (and only the iPhone 13 Mini) when purchased on a 36-month plan. While that might be a great deal, it’s pretty limiting. Did you really want the iPhone 13 Mini, and did you really want to pay it off over 36 months?

Is there a discount on the plan?

The phone might not be any cheaper, but what about the plan? Some telcos offer free or discounted months to entice you to sign up for one of their plans. While this can be great value for money, make sure you consider:

• Is this discount only on offer as a part of this deal, or is this a general promotion I can get without the need to buy a new phone on a plan?
• Do I need the plan? Even on a discount, a plan loaded with an abundance of data that you won’t use might not be of better value than your current plan

Currently, when you purchase certain devices from 2degrees, you can get 50% off your phone plan for six months. That’s a great deal! However, it only applies to plans $60 and over.

Sure, if you currently have a $60/month plan it could be a great option. But if you’re happy with your current $20 plan, do you really need to upgrade?

Furthermore, as the minimum repayment period is 12 months, you’ll be paying full price for at least half of that time, which could put some strain on your monthly repayments.

Are you happy to get a great deal for 6 months, and then be stuck paying $60/month (plus the phone repayments) for another 6-30 months?

→Related article: Paying Too Much for Mobile? NZ’s Cheapest Phone Plans

What’s the deal with trade-ins?

Trading in your old phone can be a great way to get a discount on any new device. And it could even make buying one outright more manageable. However, some telcos only offer trade-ins when buying a new device on a plan. So if getting a plan will score you a big trade-in discount, it could be a good option.

Although, you could always consider selling your old device yourself. While it’s certainly more hassle, you’re likely to get a better deal. You can then use that cash to help pay for the new phone outright, and avoid locking yourself into a long-term plan.

Are you comfortable paying it off over an extended period?

A lot can change in a few years. Putting a phone on a 36-month plan may seem like a good idea, but let’s say 15 months down the line your phone is long gone, whether stolen, broken, or lost. How will you feel seeing that money continue to come out of your account for another 21 months? What if your financial situation was to change and money became tight?

Furthermore, phone plans are regularly changing. What might seem like a good plan now could be a very different story in a few years’ time. Is that a commitment you want to make?

The reality is, in a few years’ time, you could be paying a lot of money for a no longer new phone on a no longer good value plan.

Buying a phone outright or on a plan: Which is better?

There’s not really one answer here. If you can score a good deal/discount, then a plan may be a great way to save money. But again, don’t expect any savings. As mentioned above, a lot of the time, a plan is simply a way to better manage costs. It doesn’t actually save you anything. Even so, if it’s the only way you’ll be able to afford a new phone, it might not be a bad idea.

Although, if funds are tight, don’t go putting an iPhone 14 Pro Max on a plan, opt for something cheaper.

If you do have the funds available, and buying on a plan isn’t going to net you a significant discount or deal, then buying outright is always a good move. That way the phone is yours to enjoy and you remain free to shop around and change plans at will. And because phone plans are a fast-moving industry, with new deals and discounts constantly hitting the market, being free to shop around is a big plus.

→Related article: Best Endless Data Mobile Monthly Plans

Compare phone plan providers with Canstar Blue

What is a phone without a phone plan? Nada! But don’t worry, Canstar is at hand with research into customer satisfaction and value for money covering all the major phone providers. For our latest award and ratings, just hit one of the buttons below.

Click this button for prepaid providers:

Compare prepaid mobile plan providers here!

Or this button for monthly plans:

Compare monthly plan providers here!

About the author of this page

This report was written by Canstar Content Producer, Andrew Broadley. Andrew is an
experienced writer with a wide range of industry experience. Starting out, he cut his teeth working as a writer for print and online magazines, and he has worked in both journalism and editorial roles. His content has covered lifestyle and culture, marketing and, more recently, finance for Canstar.