No contract = more expensive up front, cheaper overall.
Contract = cheaper up front, more expensive overall.
For instance, a T-Mobile no-contract plan is about $20 cheaper per month than a comparable contract plan.
Contract Nexus One = $180+(80*24) = $2100.
No Contract Nexus One = $530+(60*24) = $1970.
Not much of a difference I guess, especially over two years, but the notion that you save money by buying the phone cheaper up front isn't usually accurate. And of course without a contract, you are free to end the service at anytime and go elsewhere without any early termination fees, etc.