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I’m getting ready to upgrade my iPhone 4 16Gb to the not-yet-not-announced-but-seemingly-leaked-everywhere sixth generation iPhone. I was surprised by this, but I had assumed (seemingly wrongly) that buying a phone outright would be cheaper than getting a contract with a mobile provider.

Below is a table which outlines two purchase options. Both routes assume that Apple won’t change the pricing structure and is based on what is currently available for the iPhone 4s.

Route 1 – Get a contract with an operator

The first option has me going with a deal from Three for £35 a month that gives all you can eat data, 5000 3-3 minutes and 2000 cross network minutes over a two year period. The upfront is the money you have to pay Three as a surplus for getting that handset. Cashback is how much QuidCo give you for taking out a new contract. Old phone is how much a reputable recycling co would give for the iPhone 4 16Gb at the time of writing. I’m looking at the new phone rocking 32Gb memory (since the 16Gb is proving space problematic).

Route 2 – Buy the iPhone sim free from Apple

In this scenario I’d buy an iPhone directly from Apple and stick with my 30 day rolling contract from Three (All you can eat data, 5000 3-3 minutes and 2000 cross network minutes). The cash back is QuidCo and American Express combined for the payment (2% from Apple and 1.5% from AMEX). Naturally the recycling money is the same on that deal.

Route 1
24 month contract 840
Upfront 50
Cashback 97
Old phone 172
621 25.88
Route 2
30 day sim 600
Sim free 600
Cashback 21
Old phone 172
1007 41.96

Figures are all £GBP Sterling

In both cases the bottom of each route table signifies the total cost of the ownership, so price of contract over period plus cost of phone minus cash back and old phone recycling. The right hand figure is the TCO divided by the period to give a monthly price. In my case, I’d end up paying, across 2 years, 88p per month more than I am now!

I don’t know why I assumed that going sim free would be cheaper. The reality seems I’d be paying a premium to be able to change handset whenever I wanted. Accepted, I would get a lot more reselling a current model handset than in my case two generations old (An iPhone 4S would offer £310 recycling monies at the time of writing) but on the flip side I’d be paying a lot more in my first year of ownership to pay off that original outlay.

Which way will you go when it comes to that upgrade?

Image credit: Images_of_Money (Flickr)

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