New iPhone – Contract or Outright?


There’s an age old question, that as a society, we’ve been asking ourselves since the iPhone 3G was released all those decades ago: (what, it was only 2008? Shit…) do I get my iPhone on a contract or outright? A heady question, very important, life changing, a matter of national importance, I know. It’s a timely question too, since Apple have unleashed new iPhones on us once again.

The starting point for the answer to this question is simple: do you want a new iPhone every year?

Because if you are happy to hang on to your iPhone for 2 years, just go on a contract with the appropriate amount of data for you. Pick the carrier you like most out of Telstra, Vodafone or Optus and be done with it. Life is too short for this sort of hand-wringing. Do something more constructive than reading this.

But if you’re the type of person who ~must~ have the new iPhone every year (i.e: me), then things get complicated. You need to think about the total cost of ownership. The easiest way to do this is to think in 12 month and 24 month chunks. So, let’s break it down: you’ve got 12 months of carrier costs–your plan. That’s set in stone. You’ve also got 12 months of owning the iPhone, which can be price-tagged by the purchase price of iPhone minus what you can sell it for later (you will sell it, right?).

The sum of this 12 months of ownership is the foundation by which we can start to compare options fairly, dollar-for-dollar. Put simply:

Carrier costs + (iPhone Purchase Price – iPhone Sale Price) = Total Cost


iPhone 5c: Contract or outright?

Once you’ve done that, then you can work out the next 12 months, which is done to compare 24 month plans to 12 month plans.

So I don’t bore you to death with numbers, I’m just going to elaborate on a phone and plan that suits my usage habits (approx 20x 2 min phone calls, 30 SMS, 1GB data per month, 16GB iPhone 5s) and assume that a year old iPhone depreciates by approximately 35%, so a 16GB iPhone 5s which is $869 now, will be worth about $565 when it’s time to upgrade to the iPhone 6 (or whatever they call it) in 2014.

So my equation for 12 months looks like:

[Plan to suit 20x 2 min calls, 30SMS, 1GB data/month] + ($869 – $565) = Total Cost

If you’re upgrading every year, the cheapest option is to get your iPhone on a 12 month contract.

Unfortunately, only Vodafone does this, so if you don’t dig Vodafone for whatever reason, that’s no good to you. However, Telstra pre-paid is also a very sweet deal and to make the pre-paid offer even sweeter, you can often get recharge credit for 15% off at the supermarkets (via the nice people at Prepaid on Sale), which would bring the cost down even further.

Some key things to keep in mind when picking a provider are:

  • Here’s a relatively up to date list of all the MVNOs and carriers in Australia, and which network they resell. Very handy.
  • If you’re moving away from Telstra, you can download a CSV of all your usage for the past 12 months. Great for working out a long term trend of your usage habits. Log in to your “My Account” portal, click on “Billing History”, then “View detailed bill” – you’ll get shoved to an old looking portal, where an option to download a CSV is available on the left hand sidebar.
  • How many calls & SMS do you send? If it’s not many, go for a plan which emphases data over “included value” and save some money. If you send heaps of SMS, look at the various unlimited plans out there from almost every MVNO.
  • I looked into using “tablet” data-only plans in a smartphone, which would be an ideal option for a very low caller/SMS user, giving you 12 months to use 15-20GB. I figured you can just pay for the calls separately, but alas, if you stick a tablet only SIM from Vodafone, Optus or Telstra into your smartphone, calls are barred (I tried).
  • If you want LTE and want to go on a pre-paid/no contract plan, your options are slim. Vodafone doesn’t offer LTE on pre-paid (yet – coming around Nov/Dec apparently) and none of its MVNOs do either. Telstra has LTE on all pre-paid options, but not via its MVNOs (Boost & Aldi). Optus only offers LTE on prepaid via the Optus Prepaid Social plan – the other recharge options are 3G only – but a handful of Optus MVNOs resell 4G, such as Vaya (1.5GB of data for $18/m!) and Live Connected.

So what’s the best deal?

If you’re in the market for a new iPhone 5c or 5s, plan to get a new iPhone every year and are happy with using Vodafone, their 12 month plans are excellent. If Vodafone doesn’t do it for you, grabbing an iPhone outright and going on Telstra Prepaid is about the same price if you can afford the up front cost of the iPhone. You’re also not locked in to a contract, even if it is only for 12 months.

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