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Average Cost Per Month Explained

How do we calculate the average cost per month?

Finding and understanding mobile phone contracts and their costs is complicated. Here we try to explain how we put together our results and more importantly how we calculate the Avg cost p/m (Average Cost Per Month).

When you are looking through our results, please be aware that the amount that you pay per month is the value that is found in the cost p/m column (cost per month). The Avg cost p/m is calculated using the equation found below.

Avgerage Cost Per Month Calcularions

To calculate the average cost per month, we perform the following calculation:

  • Take the monthly line rental cost and multiply this by the duration of the contract.
  • Take the cost of the phone and subtract any cashback amount.
  • Take the total cost of the contract (monthly line rental cost multiplied by the duration) and add the cost of the phone or subtract any cashback.
  • Divide that total by the contract duration.

It can seem very confusing, so we have done a couple of examples to help illustrate the calculation that we use:

Example 1

  • Duration of the contract = 18 months
  • Monthly line rental = £35.00
  • Phone price= free
  • Cashback = £120.00

Avgerage Cost Per Month Calcularion Example 1

The calculation would be as follows:

  • (18 months X £35.00 Monthly line rental) = £630.00
  • (phone price @ £0.00 – Cashback @ £150.00) = -£150.00
  • (Total Line rental @ £630.00 – Cashback @ £150.00) = £480.00
  • Total Cost of Contract = £480.00 divided by 18 months (contract duration) = £26.67
  • Average cost per month = £26.67

Example 2

  • Duration of the contract = 12months
  • Monthly line rental = £20.00
  • Phone Price = £120.00
  • Cashback = £0.00

Avgerage Cost Per Month Calcularion Example 2

The calculation would be as follows

  • (12 months X £20.00 monthly line rental) = £240.00
  • (phone price @ £120.00 – Cashback @ £0.00) = £120.00
  • (Total line rental @ £240.00 + cost of the phone @ £120.00) = £360.00
  • Total cost of contract @ £360.00 divided by 12 months (contract duration) = £30.00
  • Average cost per month = £30.00

Some things to note when you choose your new mobile phone contract

1. The monthly cost column is the amount that you will actually pay per month if you do not go over any of your allotted monthly allowances. So if a tariff on our site says that it costs £30.00 per month in the cost p/m column, as long as you don´t go over your minute, text and data allowances, tthen that is what you will pay per month. The Average monthly cost column may be cheaper or more expensive than the actual cost per month column depending on whether or not you have to pay for the phone, or whether you get cashback.

2. Cashback affects which deals are the best. In recent times the mobile phone industry has been given a hard time about cashback deals, with people commenting that they are difficult to claim back. There are now much more stringent rules in place and we only display retailers who have a longstanding history of honouring their cashback deals.

3. Essentially there are 2 types of cashback deals.

a. The first is cashback by redemption
With this type of cashback deal, you will be asked to send your bills in at certain dates and you will receive cashback for doing so. Depending on the deal that you have taken, you will usually need to send back the bills in stages and you will get your cashback in stages as well.

These cashback by redemption deals do offer the best value for money, but you do have to be organised and make sure that you send your bills in at the correct time to get your cashback. It is also normally true that if you miss one of the periods when you should have sent in your bills, all your future payments will be void.

You can take these deals out of our search results by selecting "no" on the cashback by redemption? in our quick-search.
Remember the amount you pay per month is the amount found in the Cost p/m column and not the Average cost p/m column. This column simply shows you what your bill would work out per month if you were to claim all your cashback and divided it by the number of months your contract is for.

b. The Second type of cashback available is automatic cashback.

This is normally sent to you after you have paid your first bill (sometimes sooner). We have decided to leave these deals in the results even if you select "no" for cashback by redemption in the quick search. The reason that we decided to do this is that you get the cash automatically and not much work is required on your part.

Please do bear in mind that you will still pay the monthly amount that is found in the cost/pm column and not the amount found in the Avg. Cost p/m column. The Avg cost p/m column is there to show you how much you are saving per month by taking your automatic cashback and dividing it by the number of months the contract is for.