Despite its popularity with providers, users are still wondering: Is financing a phone worth it?

Is Financing a Phone Worth It?

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In recent years, smartphone prices have skyrocketed and users have been looking for new ways to save. Device financing is a solution offered by providers that allows users to pay the price of their devices in monthly instalments with no upfront costs. Although it’s commonly offered by providers, is financing a phone worth it?

In this article we’ll explain what is device financing, what are the other types of payment plans, and, if device financing is worth it for you.

What is Device Financing?

Device financing is a way of spreading out payments for the purchase of a mobile device, usually on a period of 24 months. Device financing is offered by the big 3 carriers and often comes with no upfront payment and interest fees.

With device financing, the cost of the device is usually split in 24 monthly payments at 0% interest. For example, if you are buying a $960 smartphone on a 24 month plan, you will be paying $40 per month for the phone on top of your monthly plan.

Device financing often comes with upfront discounts on the price of the device and your provider might also offer a trade-in discount if you have an older device you will replace. Device financing is not always available on cheaper plans. If you wish to switch carriers, you will have to pay the remaining balance on the phone beforehand. When the device is paid off, you only need to pay your monthly plan.

Earlier this Summer, Canadian providers announced new 36-month financing plans. These plans were created to make it even more affordable to purchase new devices, by spreading the total cost over 36 months instead of 24. While it may seem like a great idea, it is potentially against the rules laid out by the CRTC in the Wireless Code.

The CRTC has since asked providers to stop offering financing plans longer than 24 months and started investigating these three year financing plans. Read our article here to learn more about the recent CRTC announcement.

What are the other payment options?

Device financing is not the only flexible payment option offered by providers. There are other ways to purchase a device, such as with a tiered plan, a smartphone tab or even by leasing the device.

1. Tiered plans

Tiered plans are a very popular way of discounting phone prices in Canada and can offer some of the biggest savings. Their cost is tied to the savings on the upfront cost of the device. For example, a regular plan could cost $65 per month if you bring your own device; $75 if you purchase a cheap phone with no upfront cost and $105 if you purchase a premium smartphone with no upfront costs. If you don’t mind paying upfront fees, you can save even more on your monthly payments and the overall cost. That said, you can’t downgrade your contract without paying fees, you’ll keep paying that rate even after 2 years unless you switch plans, and, your carrier could even raise the cost of your monthly plan during the contract.

2. Smartphone Tabs
Smartphone tabs are similar to device financing and tiered plans. There are also a great way to save big on certain smartphones. The price of the device is discounted, and then split over a period of 24 months on top of your plan. For example, instead of paying $960 for a phone, a smartphone tab plan could cost $720 in 24 monthly payments of $30. At the end of the 2 year contract, there would be only the plan left to pay. It’s great to save with a smartphone tab, but if you wish to break the contract, carriers might ask you to pay part of the original device’s price and not the discounted price. Carriers can also raise the price of your plan during the contract.

3. Leasing
When leasing a device, you can get a device at a cheaper upfront cost by signing a two year contract. At the end, you can either bring it back to the provider (in good working condition) or keep the device and pay the difference between the regular price of the phone and the discounted price you have paid. Depending on the carrier, it’s available with tiered plans and financing.

Leasing is a great way to save on the cost of a new device and is perfect for users who switch phones every two years. While leasing has many advantages, you lose the device after two year unless you pay it off and it’s often only available for in-store purchases.

Learn more about leasing your device in our article about phone leasing in Canada.

Is cell phone finance worth it?

With all these developments over device financing, it is important to consider whether cell phone finance is even worth it or would you be better off saving up and paying upfront for the device you want.

Despite device financing being introduced as an option to make smartphones more affordable, the intention does not always translate to your monthly invoice or even across the term of your contract. Let’s say you’d like to get the Samsung Galaxy S10+ on a 24 month device financing option. We’ve analyzed the cost breakdown of financing the device with Rogers, Telus and Bell as against buying the device upfront and choosing a BYOD plan with a different carrier.

Financing a Samsung Galaxy S10+, as of September 12, 2019

Listed cost of device$1230
$1575$1574$1269 (on Samsung website)
Monthly payment (on a 24 month term)$51.25$65.62N/A (included in monthly price)N/A
Cost of the plan (cheapest available with device financing)$65 (current offer) for unlimited data and 15GB high speed data$75 for unlimited data and 10GB high speed data
$105 (device financing only available with their premium Ultra Plans)10 GB of data for $38.70/ month + Canada wide calling and Unlimited Texts with Fizz or choose your plan according to your needs
Total monthly cost$116.25$140.62$105$38.70 / month
Cost over 24 months$2790$3374.88$2520$2197.8

These are the factors that PlanHub takes into account to help you choose the best available option for whatever your current needs are. Search here and start choosing smarter.

Is 24 month device financing the only option?

With all the carrier promotions and news surrounding new device financing options, it’s easy to forget that device financing is not necessarily the best option for those looking to upgrade to a new device.

Remember that device financing is only available with the three biggest providers (Bell, Rogers and Telus) but the phones are available with all other carriers. It’s still possible to buy the phone with a different carrier with a traditional contract. Compare all available options with our comparison tool and choose the one that best suits your needs.

Even with the Big 3, it is possible to buy the phone on a lease and reduce upfront costs if you agree to bring the device back to the carrier at the end of two years in ‘good working condition’. If you buy your device with a smartphone tab or a tiered plan, you might be able to save even more.

As we showed in the table above, sometimes saving up to buy a device upfront and pairing it with a BYOD plan can be the most economical way. It is also not necessary to buy the phone directly from the carrier’s website. With some good research (and perhaps by listening to your gut instinct), it is possible to get some really good deals on sites such as eBay, Craigslist and Kijiji.

If you would prefer to save some serious cash, and perhaps settle for last year’s flagship, sites such as Get Orchard and Cell Clinic offer some really good deals on pre-owned and certified refurbished phones. They even offer free shipping and warranties on phones bought with them. To know more about the potential advantages of buying a certified pre-owned device, refer to our article here.

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