What’s Cheaper? Buying an Unlocked iPhone vs Subsidized 2-Year Term Compared

If you’re on the hunt for a new iPhone 5s or iPhone 5c and you are looking at a 2-year term contract, it can be tricky to compare the plans available especially when it comes to an unlocked iPhone versus one on contract.

Luckily if you have an Apple Store in your area they have made the process easier by comparing the minimum plans required to get an iPhone on contract. As you can see from the pictures below, the rates are shown on iPad displays in-store.

As for finding the best plan? Well, at this point in time they all seem the same from Rogers, Fido, Telus, Bell and Virgin:

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The ‘cheapest’ iPhone plan on a 2-year term looks to be from Bell at $70/month for 500MB of data and unlimited nationwide minutes.

What’s a better deal? Get an iPhone on a 2-year term or buy an unlocked iPhone from Apple?

We get asked this all the time. What’s a better deal? Well it all depends on your needs. Let’s try to compare an iPhone plan with 2GB of data on contract and off contract.

Scenario A: Buying an iPhone 5s on a 2-year contract

  • 16GB iPhone 5s: $229.99
  • $85 plan with 2GB data x 24 months: $2040
  • Activation fees: Bell ($15, promo price); Rogers ($15)
  • Unlocking fee: Rogers ($50); Telus ($35); Bell ($50)

Total cost: $2334.99 + tax (iPhone, plan, $15 activation fee, $50 unlocking fee)

Scenario B: Buying an unlocked iPhone 5s from Apple and going month to month

  • 16GB iPhone 5s: $719
  • Plan 1 — $59 Fido Smart Plan with 2GB data x 24 months ($53.10/month after 10% BYOD discount): $1274.40
  • Plan 2 — $49 Fido Smart Plan with 1GB data x 24 months ($44.10/month after 10% BYOD discount): $1058.40
  • Plan 3 — $39 Fido Smart Plan with 400MB data x 24 months ($35.10/month after 10% BYOD discount): $842.40
  • For couples/families: add an additional line, save an additional 10% on top of 10% BYOD discount

Plan 1 total cost: $1993.40; potential savings vs 2 year contract —> $341.59

Plan 2 total cost: $1774.40; potential savings vs 2 year contract —> $560.59

Plan 3 total cost: $1561.40; potential savings vs 2 year contract —> $773.59

So as you can see, an unlocked iPhone from Apple is cheaper than going on a 2-year term subsidy. However, this route will cost you more in the short term if you don’t have cash up front for an unlocked iPhone.

Plan 3 works out to a ‘free iPhone’ (if you want to call it that) if you can stick to the paltry 400MB per month or treat it as a flex data plan for light users. Even with one tier of overages, you’re paying $40.10/month for 650MB of data (at $5/250MB). This plan would work best for those who don’t use their iPhones at work and only at home (where Wi-Fi is abundant).

Even if you need extra data throughout the year, if you average out the cost of light overages you’re still saving versus paying the minimum $85 per month on a 2-year contract. This would be ideal for those who want the cheapest iPhone plan available with minimal data (and I know there are lots of you out there).

If you stuck to Scenario B with Plan 1, your unlocked iPhone pricing is almost cut in half due to the ‘savings’. Also, since you’re going month to month, if a better promo plan pops up throughout the year you can jump ship to another carrier and save even more.

With an unlocked iPhone out of the gates, worldwide travellers can rejoice and it adds extra value to your phone when selling on Craigslist, eBay, etc. so you can rinse and repeat. It’s also a way to take advantage of your hard fought retention plan if it’s a good one.

Of course, these scenarios are just basic comparisons so your situation may vary from others. What’s your ideal way to get an iPhone on the cheapest possible plan?

Update Feb. 15: As many have noted in the comments, if you have decent WIND Mobile coverage in your area, an unlocked iPhone 5s/5c on the network will save you even more money.

Also, with buying an unlocked iPhone online, don’t forget to go through online portals from Aeroplan and Air Miles to get your travel rewards!