Mobile phone networks are pushing contracts of up to FOUR YEARS – what to look out for before signing one

The creeping rise of mobile phone contracts with longer terms is costing consumers a lot of money. Often the contracts are much more expensive than expected.

Anyone who has taken out a new phone contract in recent years will have noticed that there are more and more contracts with a term longer than the traditional 24 months. Sometimes even with a term of 36 months or longer.

Phone users can even take out a 48-month phone plan, which was launched by O2 in January 2024.

According to retailer Mobile Phones Direct, just 20 percent of phone contracts in the year to May 2018 were for more than 24 months. By 2024, that will have more than doubled to 43 percent.

Many phone providers, such as BT and Vodafone, regularly offer phones with standard 36-month contracts. However, customers can also change these contracts to shorter periods if they wish.

The rise of longer term phone deals is a result of the fact that devices are becoming more expensive. The longer the deal, the lower the monthly payments.

Although consumers ultimately pay full price for the device, the lower monthly payments mean they spend less money in the short term.

But there are a few things you need to look out for when taking out a phone contract for 24 months or longer. Not knowing these could cost you dearly.

Costs appear lower than they actually are

The monthly repayment costs are lower with a 36-month contract than with a shorter term contract, assuming the device is the same.

For example, if you buy an iPhone 15 Pro from O2, it will cost £53.11 per month, spread over 36 months.

But the same phone costs £65.17 per month if you pay it off 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 with EE costs £30.31 per month for 24 months and £20.21 per month for 36 months.

That 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 in both cases.

But unwary consumers can easily feel like they’re getting a better deal than they actually are, as longer-term phone plans have lower monthly payments.

Dan Melia of retailer Mobile Phones Direct said: ‘In the past it was normal for mobile contracts to last 24 or even 12 months. However, these longer contract terms give providers the opportunity to spread the cost over a longer period, often making the cost appear lower than it actually is.’

For telephone subscriptions with a longer term, calling credit is not included

With any phone subscription longer than 24 months, price confusion can easily occur.

A phone subscription consists of two different things. One cost is for the physical phone, and the other cost is for calling credit – calling, data and texts.

For phone subscriptions with a term of up to 24 months, this is all quite simple, as these payments are usually made in one go.

But for deals lasting longer than 24 months, things get more complicated.

This is because telephone providers are not allowed to bundle telephone and calling credit for subscriptions that last longer than 24 months, according to rules set by regulator Ofcom.

The price of a 36-month telephone subscription therefore only includes calling credit for a maximum of 24 months, and possibly no calling credit at all.

This makes the offers seem much cheaper than they are. Because to make a device usable, the costs for calling credit must be included.

After two years, consumers must extend their calling credit for another year.

If you are not proactive about this, you may end up paying too much because you are automatically signing up with your current phone provider, which may not be the best deal on the market.

Melia said: ‘Many providers advertise their monthly charges for a device, including the additional call credit or usage charges in the small print. They lure buyers in with cheap deals that end up costing significantly more than advertised once you factor in call minutes, texts and data.’

Tied up for a longer period

One problem with long-term phone plans is often overlooked: consumers are tied to their phones for a longer period of time.

If you decide the phone is too expensive or doesn’t meet your needs, it will take longer to replace it.

Additionally, it means that the longer you use your phone, the less valuable it will be if you ever want to sell it.

Melia said: ‘What is often overlooked is that this also means consumers miss out on the opportunity to maximise the future trade-in value of their phone, as it is not worth as much after three years as it is after two years.’

Inflation-linked price increases

Most mobile networks increase the prices of their existing contracts every year.

These mid-contract price increases take place from March to May. Here, mobile providers pass on the cost increases related to inflation, often with an additional surcharge on top.

This year, some mobile networks increased customers’ bills by 7.9 percent.

The longer your contract, the more these annual increases stack up, meaning customers could be paying significantly more at the end of their contract than when they started.

Some networks are now moving away from inflation-linked price increases and replacing them with a fixed cash amount, for example by increasing customers’ monthly bills by £1 a year.

For customers with more expensive subscriptions, this could mean savings, but customers with cheaper subscriptions, such as SIM-only subscriptions, could end up paying a higher percentage than the old inflation-linked increases.