Sometimes it feels like you need a PhD in mathematics to understand phone tariffs. We explain how to compare the cost of mobile phone tariffs with less hassle.
Mobile phone price plans are renowned for being complicated – sometimes it feels like you’d need a PhD in mathematics to find the best value deal. Even once you’ve decided which phone you want, you’ve got a myriad of different tariffs with varying upfront phone costs, different monthly line rental charges, cashback deals and line rental offers.
Is it better to go for a £25/month deal with an £39 upfront charge and 15 months half price line rental or a straightforward £20/month tariff with a free phone? When considering iPhone tariffs, is it better value to opt for a £40/month tariff with a free phone or a £35/month tariff with an upfront charge? In this article, we outline a framework for answering these questions.
What is the ‘total cost of ownership’ and ‘effective cost per month’?
When calculating the cost of a mobile phone tariff there are several key things to consider:
- Monthly line rental charge. This is the charge you pay each month to your mobile phone company.
- Upfront phone charge. Sometimes you’ll get a “free” phone with your contract; sometimes there is an upfront charge associated with your new phone.
- Discounts such as cashback, free line rental or half price line rental. These can reduce the total cost of your contract but don’t be fooled: cashback deals aren’t always cheaper as you could be paying more line rental or a larger upfront fee.
In comparing different tariffs, we want to calculate one number which takes into account all of these factors and works out how much you will have actually paid over the length of the the entire contract. At Ken’s Tech Tips, our preferred method is to calculate the “Total Cost of Ownership” – this is the total amount you’ll pay over the length of your contract taking everything into account.
For the PhDs in mathematics, we use the following formula (don’t panic… we have an online calculator and Excel spreadsheet too):
Typically you’ll get a total cost of ownership somewhere between £500 and £1,000 for a 24 month contract. To make this figure clearer and to put it into better perspective, we often then divide the total cost of ownership by the number of months to obtain the effective cost per month. The effective cost per month is what you’d essentially pay each month on average throughout the entire contract.
Once we’ve calculated the effective cost per month, things are simple. The effective cost per month already incorporates all of the charges and discounts we’ve discussed so the cheapest tariff is simply the one with the lowest effective cost per month.
How can I calculate the ‘total cost of ownership’ and ‘effective cost per month’?
We’ve put together an Excel spreadsheet and an online calculator to calculate the ‘total cost of ownership’ and ‘effective cost per month’ for you:
If you prefer to do the calculations offline, download our Excel spreadsheet. If you do the calculations online, please save your results before leaving this page.
Your Comments 6 so far
We'd love to hear your thoughts and any questions you may have. So far, we've received 6 comments from readers. You can add your own comment here.
Jennifer Ayling said:
Thank you Ken for your helpful advice and speedy replies to my queries, I have already recommended you to friends and hope you continue to do well, thank you, Jennifer
JENNIFER AYLING said:
Hi Ken I’m hoping to get a Samsung j5 2016 in December from Carphone warehouse, and the contract is £15.50 a month over 24mths.The phone itself is £199.00 to buy and a SIM that I want is £7.50 a myth over 1 year.. Would it be better to buy outright? Or would I not get the same benefits as a contract? Thanks jenni
There are actually many benefits of buying your handset outright (e.g. you’ll typically get an unlocked smartphone and you’ll be able to upgrade phones or change network much more easily). I always buy own handset outright so would definitely recommend doing this if possible!
In your case, there isn’t actually much of a cost saving by buying outright. If you pay £199 for a phone and £7.50/month over the next 24 months, the total cost of ownership adds up to £379. With the 24-month contract at £15.50/month, the total cost of ownership is £372.
Hope this helps,
Jennifer Ayling replied:
Thank you Ken, you have been quick in answering my question. I have never thought of buying a phone outright.. But I will really consider it now. Just wondering if I will have the same rights as the contract, but will the roaming charge be different with a SIM as I was thinking of getting a more expensive SIM up to £20..to cover 500mins,5000 texts and 1gb data ?
Jennifer Ayling replied:
Hi Ken, I gave you the wrong details for the SIM ONLY DEAL, it’s £20 for unlimited mins and texts and 1gb data or I have spotted a 3deal for 600 mins unltd texts and 1gb data (also has roaming allowance) is this worth considering? Jennifer
You’ll need to check the specifics of the tariff you’re joining, but typically the benefits are the same on Pay Monthly & SIM Only. On Three, whether you get inclusive roaming only depends on whether you choose an Essential or an Advanced price plan.
Some recommended deals:
1. For 600 minutes, unlimited texts and 1.5GB of internet, I recommend getting ASDA Mobile’s free Pay As You Go SIM card. A top-up of £10/month will give you everything you need (coverage comes from EE and there’s no contract).
2. If you don’t need a roaming allowance, Three currently offers unlimited minutes, unlimited texts and 4GB of data for £9/month (12-month contract)
3. As you say, there is also a deal from Three with 600 minutes, unlimited texts, 1GB of data and inclusive Feel At Home roaming (this will currently cost you £11/month on a 12-month contract).
Hope this helps,