PAYG/contract which is better for you? Idea

Li0nhead

On PAYG myself and have often wondered if I would be better off on contract.

Then it hit me is how do you work it out?

I came up with the following idea on how to work it out.
Note this will probably only work when comparing PAYG to contract and not if your going the other way (unless you intend buying monthly bundles)

So Take the cost you paid for your PAYG mobile. Think how often you will replace it. I.e if you buy another every two years, you then divide the total cost by 24 to give you the monthly cost of your handset.
Then you take the amount you spend on PAYG each month.
Add the two figure and then you have the monthly amount you spend on your phone. Search the contract deals at this figure and see if you would be better off.

Two examples. First mine and then one of my parents usage.

Phone: Moto G. Cost when bought: About £100
How often get a new phone: approx every 18 months
100/18= £5.56 PM handset cost (figure rounded up to the nearest penny)
Amount spent on average month on calls: £10 a month bundle which serves me fine.
£10 + £5.56=£15.56 PM total cost.
Search the handset I use on http://www.moneysupermarket.com/mobile-phones/ and the contract around my usage: £11.99PM with a messy cashback multiple redemptions deal or £13.99PM without the messy cashback.
24 month contract though.


One of my Parents:
Phone: Cheap basic Samsung Costing approx £30 when bought.
How often get a new phone: Approx every 2 years.
30/24= £1.25PM phone cost.
Amount spend on average month on calls: Tops up £10 approx every 3 months. so £3.33.
£1.25+£3.33= £4.58 total monthly cost.
Search on http://www.moneysupermarket.com/mobile-phones/: Cheapest with messy multiple redemptions cashback £1.50PM deal. £7.50 PM non cashback deals.

Just thought I would share.

Herongull

Because many contracts last for 24 months and people like yourself want to replace it at more frequent intervals, it is better to work at it from the other direction.

Multiply phone contract monthly payments by 24 (or whatever the minimum term is). This gives you the total cost of the contract phone and 24 months of calls/texts/data.

Compare this with the cost of buying the phone outright and 24 months sim free or PAYG.

Then you are comparing like for like.

EXCEPT

There are two other factors to take into account.

1/ Contracts are inflexible. You are stuck for 24 months unless you buy them out. What if you move to an area with no signal? Or move abroad. You still have to pay for the calls etc that you can't use. With PAYG you just port out.

2/ Contracts are high risk. What if your phone is lost or stolen? Thieves run up £thousands in premium rate calls which you have to pay for. You are liable for all phone useage by thieves until you report the phone lost or stolen.

3/ Contracts are stressful due to 1/ and 2/

Therefore unless contracts are massively cheaper, just buy the phone outright and go PAYG.