Pundits would have you believe that you are better off buying a sim-free phone and then finding a service provider and obtain a sim-card for that provider. This is the cheapest option in some cases, but not all.
Basic Phones
If all you need is a phone to make phone calls and text messages on then this can be the best option. You can pick up a basic phone for £20 from a supermarket and then get a free Pre-Paid sim from any provider.
These phones use established technology and have no bells and whistles. They work fine however and are the prefect first phone for a child or an adult who only uses it occasionally.
If you want blue-tooth on your phone then you will need to pay £10-£20 extra, but this still works out a good deal for most people.
Advanced Phones
If you want an iPhone of any variant or the latest Samsung then you need to do the maths more carefully.
These phones are really mini-computers. They use the latest technology and are expensive because they are new. To buy a sim-free iPhone 4S will cost you around £449 and an iPhone 5 around £529. The Samasung S3 is currently a penny under £500, though that price will probably drop £30 in the coming weeks. On Amazon.co.uk you can buy the sim-free Galaxy S3 for £425.
These prices are so high compared to buying the phone with a network monthly contract because the network subsidises the up-front cost of the phone and gets its money back from the monthly charges that are part of the contract.
Extra Costs
Having a sim-free phone is not enough though. You also need to buy a sim card and pre-paid phone credits from one of the networks. The sim-card is usually free because the network makes its money from the pre-paid cards that you buy.
Even that is not enough. If you want to use your new smart phone to its maximum potential then you need to buy a data package from the same network. Usually this comes as a monthly package that includes a set amount of data. A monthly data package starts at around £10 a month.
Comparing Costs
Consider, you can find a monthly contract for a Samsumg S3 for around £40 a month for 2 years and get your phone free. You pay £960 over 2 years.
Buying the same phone sim-free costs £425 (from Amazon.co.uk). An air-time package is going to cost at least £240 over the same two years and then prepaid call cards at £20 a month, another £480 . . . A total cost of £1145 over the two years.
Suddenly, the sim-free option does not look cheap, especially when you consider that the contract package includes more calls text and data than the ones quoted for the sim-free phone. You will also probably be eligible for a low cost upgrade partway through your two year contract.
Written by Sue Strong. You can see how complicated phone cost comparisons are, click here for the latest iPhone deals.