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Sep 16

Upgrading the iPhone

Now that iPhone carrier subsidies have ended at all the major carriers, most people are going to be paying full freight for a new phone.¬†For a 256GB iPhone 7, that’s $849 (or closer to $925 after you include California state sales tax). Apple also allows people to pay this amount off in monthly $35.37 installments over 24 months, without any interest charges. However, if you want to sell your phone within those 2 years, I haven’t looked into how the installment plan affects that.

Other options include going on Apple’s iPhone Upgrade Program, or a carrier upgrade plan like AT&T Next.

iPhone’s Upgrade program is a 24 month contract which generally allows you to upgrade to a new unlocked iPhone every 12 months, and comes with AppleCare+ over the same period. AppleCare+ covers two incidents of accidental damage, subject to payment of a $29 service fee for screen damage and $99 for any other type of damage, plus tax. For the 256GB iPhone 7, the upgrade plan is $40.75/month.

After you’ve made 12 payments on the plan, you can trade in your iPhone with Apple for a new one, and the 24 month clock starts all over again. If you complete 24 months of payments, the phone is yours to keep.

Rumor has it that the next version of the iPhone is going to be a significant upgrade (I’m guessing it won’t be the iPhone 7S, and it might not even be called the iPhone 8). So, might it be worth going on the upgrade program to take advantage of this?

The easy way to look at it is that if you upgrade after a year, you’ve essentially leased the phone for 12 months for $489 (or slightly less if you remove the AppleCare component, which is baked in at essentially the $129 retail price).

Because the phones are now sold out-of-contract and unlocked, you could instead simply buy a phone outright and then next year attempt to sell it on eBay or similar. As long as the phone hasn’t depreciated more than $489 (or $414 if you factor in sales tax), you’ll be ahead. In other words, the target sales price is $435.

I’m thinking that as long as you keep your phone in good condition, you’ll be able to sell it for more than $435 in a year’s time. An eBay search shows used 128GB iPhone 6S models regularly selling for $500 and up.

You can think of the difference in your actual resale price and $435 as the fee Apple is charging you to buy the iPhone from you instead of you having to go out and sell it yourself.

It’s interesting to note that Apple also offers a trade-in program, which currently values an unlocked 128GB iPhone 6 in good condition at $225, so you can see where the margin lies there.

In summary, now that carriers aren’t subsidizing new phones, locking them, or locking customers into 24-month contracts, you can essentially run your own upgrade program if you’re comfortable with selling your phone at the end of the year if you want to upgrade. You could do this before, but now that we don’t have the option of buying a subsidized plan (which essentially gave a very substantial discount for getting locked-in), this approach becomes a lot more attractive.

  1:26pm  •  Consumer Electronics  •   •  Tweet This  •  Add a comment

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