12, 24 or 36-month phone contracts: Which is better?

Up until a few years ago, consumers could choose to purchase their phone on a plan outright, over 12 months, or over 24 months. But in recent years, flagship phone prices have soared by hundreds of dollars, making upgrading a far more costly endeavour. That’s where 36-month phone contracts come in. Introduced around 2019, these longer-lasting payment contracts aim to keep monthly fees to a minimum - but are they really worth being tied down for three whole years?

Here, we break down the pros and cons of each phone contract length so you can choose the right one for you.

Ever since their introduction a few years back, 36-month phone contracts have essentially replaced 24-month payments as the go-to for people who want the latest tech without breaking the bank.

Though you’ll end up paying the same amount overall (give or take a few cents) whether you opt for a 36-month contract or a 12-month contract, there are significant savings to be had by opting for the longer period.

Take the iPhone 12 64GB for example. Here’s the cheapest it’ll cost you on a 36-month contract with Telstra, Optus and Vodafone.

Here’s how much those same plans will cost on a 24-month repayment contract.

That’s a difference of around $15 per month. Still, for some, committing to three years with the same phone (or telco) might not seem like a great idea. Fortunately, you won’t have to pay a penalty if you decide to leave your phone repayment contract early - you’ll just need to pay out the remainder as a lump sum and you’ll be free to move onto that shiny new device. Also, Telstra, Optus and Vodafone’s mobile plans are all contract-free, meaning you can ditch your plan at any time.

The tried-and-true 24-month phone contract is still going strong and remains a popular choice for those who have become used to the two-year phone upgrade cycle. Though the monthly costs are much higher today than they were a few years ago, it’s still very much possible to get the latest and greatest for less than $100 per month on a plan.

For comparison’s sake, we’ll be using the iPhone 12 64GB again. Here are the cheapest plans currently available with Telstra, Optus and Vodafone on a 24-month phone contract.

As you can see, the monthly fees are considerably higher than those found on a 36-month repayment plan, but it’s still far less than you’d have to pay on a 12-month arrangement.

Again, all three telcos offer 12-month phone contracts, but as the most expensive payment plan, it’s generally not the most popular. That said, if you’re one of those people that simply has to have the brand new iPhone or Samsung Galaxy as soon as it comes out, 12-month repayments might just be perfect for you.

If you opt for an iPhone 12 64GB on this payment term, you’re looking at an extra $50 (at least) per month on top of what you’d be paying on a 24-month contract above. That could mean your total monthly bill for your phone and mobile plan is in excess of $150.

If you’re looking for the cheapest way to get a new phone and don’t mind paying upfront, buying your new device outright could save you heaps of money in the long run.

First off, non-telco retailers like Kogan, Amazon and Mobileciti often sell imported models at a discount, which will still work in Australia (and everywhere else), but generally cost less than simply walking into the Apple Store or JB Hi-Fi and picking one up at full price. Secondly, many of these retailers also offer refurbished phones, which can come in hundreds of dollars less than buying brand new.

Even if you can’t manage to find a better deal than full price (or if you simply want the security of an Australian warranty), there are still other ways to save your money over time. Instead of sticking with one of the big three telcos, consider a smaller provider. Also known as MVNOs, these providers offer similar (if not the same) coverage as Telstra, Optus and Vodafone, but with far better value offerings. It does mean sacrificing the perks that come with bigger providers, but the money you’ll save is easily worth it.

Not convinced? Here are some of the most popular MVNO plans right now.

To put that into context, the cheapest iPhone 12 64GB plan hovers around $40 per month with a $55 per month phone cost. Over a 24-month period, that works out to be $2,280.

But how much would it cost if you purchased the same phone outright at full price ($1,349) and pair it with an MVNO plan over 24 months? Say you go for Woolworths Mobile’s $25 plan, which offers around the same amount of data (20GB) as Optus and Vodafone’s cheapest plans. Over a two-year period, both the phone and plan will set you back $1,949. That’s well over $300 cheaper than the same deal on a contract.

In the end, it all depends on what suits your financial circumstances. Though buying outright and pairing with a cheaper plan costs less overall, the high upfront cost can be quite daunting. Beyond purchasing outright, we’d recommend 24-month repayments for most people. That should keep the monthly fee manageable, while still allowing you to upgrade your phone every couple of years.