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The insidious rise in long-term mobile phone contracts is costing consumers dearly: deals often cost much more than expected.
Anyone who has signed up for a new phone contract in recent years will have noticed an increase in contracts lasting longer than the traditional 24 months, with some lasting 36 months or even longer.
Phone users can even sign up for a 48-month phone contract, which O2 launched in January 2024.
Mobile phone headache: Consumers can be confused by the terms and conditions of long-term phone contracts, which may not be as cheap as they initially appear.
Only 20 per cent of phone contracts had terms longer than 24 months in the year to May 2018, but that figure has more than doubled to 43 per cent in 2024, according to retailer Mobile Phones Direct.
Many phone providers, such as BT and Vodafone, regularly promote phones on standard 36-month contracts, although customers can customize them to shorter periods if they wish.
The increase in long-term telephone contracts is a consequence of the rising cost of phones. The longer the contract, the lower the monthly payments.
Although consumers end up paying the full cost of the phone either way, lower monthly payments help reduce expenses in the short term.
But there are some things to keep in mind when signing up for a phone contract lasting more than 24 months, and not knowing them could cost consumers dearly.
Costs appear lower than they actually are
Monthly payment costs will be lower for a 36-month contract than for a short-term one, assuming the phone is the same.
For example, buying an iPhone 15 Pro on O2 costs £53.11 per month if spread over 36 months.
But the same phone costs £65.17 a month if paid over 24 months.
In both cases, the total cost of the phone is barely different: £868.08 for 24 months and £867.96 for 36 months, plus the same £30 upfront fee in both cases.
Similarly, buying a Google Pixel 8 Pro phone on EE costs £30.31 a month for 24 months and £20.21 a month for 36.
This equates to £727.44 over 24 months and £727.56 over 36 months – 12p more.
A top-of-the-range Samsung Galaxy S24 Ultra 5G phone costs £49.50 a month for two years and £33 a month for three years – a total of £1,228 either way.
But unwary consumers can easily feel like they are getting a better deal than they actually are as a result of the lower monthly payments with long-term phone contracts.
Dan Melia, of retailer Mobile Phones Direct, said: “It used to be the norm for mobile contracts to last 24 or even 12 months, but these longer contract terms give providers the ability to spread costs over an extended period, meaning costs often appear lower than they actually are.”
Long-term phone offers exclude airtime
Pricing confusion can easily accompany any phone contract lasting more than 24 months.
A phone contract is made up of two different things: a charge for the physical phone and a charge for the time of use (calls, data and text messages).
This is all fairly straightforward for phone contracts of up to 24 months duration, as these payments are usually bundled together.
But this becomes more complicated for agreements of more than 24 months.
That’s because phone providers can’t bundle phone and airtime into deals longer than 24 months, under rules set by regulator Ofcom.
Therefore, the price of any 36-month phone contract will only include airtime for a maximum of 24 months, and may not include airtime at all.
This makes the deals appear much cheaper than they are, as the cost of airtime must be taken into account for a phone to be usable.
After two years, consumers will have to renew their airtime for one more year.
Not being proactive with this can mean overpaying because you are automatically signed up to a deal with your current phone provider, which may not be the best deal on the market.
Melia said: ‘Many sellers promote their monthly phone costs, leaving additional airtime or usage costs in the fine print, luring buyers with cheap deals that add up to considerably more than advertised once minutes, texts and the data plan are added up.’
Tied for a longer period
An often overlooked problem with long-term phone contracts is that consumers are tied to their phones for a longer period of time.
If you decide the phone is too expensive or doesn’t suit your needs, you’ll have a longer payment period before you can trade it in.
Plus, owning your phone for a longer period means it will be worth less if you ever decide to sell it.
Melia said: “Something that is often overlooked is that this also means consumers may miss out on the opportunity to maximise the future trade-in value of their phone, as it won’t be worth as much after three years as it would after two.”
Price increases linked to inflation
Most mobile phone networks increase the prices of their existing contracts every year.
These mid-contract price increases take place from March to May, and see mobile companies pass on inflation-linked cost increases, often with an additional charge.
This year, some mobile networks have increased their customers’ bills by 7.9 percent.
The longer your contract, the more these annual increases will add up, meaning customers could be paying significantly more at the end of their contract than when they started it.
Some networks are now abandoning inflation-linked price increases and replacing them with a fixed cash amount (for example, increasing customers’ monthly bill by £1 per year).
This may represent a saving for those on more expensive contracts, but customers on cheaper contracts, for example Sim-only contracts, could end up paying a higher percentage than the old inflation-linked increases.
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