If you buy AppleCare+, Apple's new iPhone Upgrade Program is a great deal

Posted:
in iPhone edited September 2015
While it lacks the fanfare of new hardware or software, one of the biggest announcements from Apple this week was its competitive iPhone Upgrade Program. It's actually an interest-free way to pay off your new iPhone and AppleCare+ warranty over a two-year period, with the added option to upgrade your iPhone to the latest model every year.




tl;dr: Apple's new iPhone Upgrade Program is a no-brainer for customers who buy AppleCare+ and want to upgrade their iPhone every year.

Unlike installment plans offered by some wireless carriers, Apple's iPhone Upgrade Program features a completely unlocked iPhone. In addition, the program is also interest free, so the loan comes at no cost to you.

In other words, the price you pay over two years is identical to what you would pay upfront for a new, unlocked iPhone 6s and AppleCare+ two-year warranty.

Consider the mid-tier 64-gigabyte iPhone 6s, which sells for $749. Adding on a $129 AppleCare+ warranty brings the total cost to $878.

The iPhone Upgrade Program for the same 64-gigabyte iPhone 6s with AppleCare+ costs $36.58 per month for 24 months. That adds up to $877.92, or 8 cents less than you would pay upfront for an identical phone and warranty.

Apple's plan also has the added benefit of offering customers the ability to get a new iPhone after 12 payments. That means users who sign up for Apple's installment plan can trade in their iPhone 6s next September, and obtain a new, hypothetical "iPhone 7" by re-extending their iPhone Upgrade Program out 24 months.




So what's the catch? From what we can tell, there isn't much of one.

Apple's interest-free loan is backed by Citizens One, and will be available at the company's U.S. retail stores. Qualifying buyers will need to physically go into an Apple Store to apply and pick up their phone, and activate with a U.S. carrier. And of course, you'll need to pass a credit check to be approved for a loan.

Apple will begin accepting reservations for iPhone Upgrade Program applications this Saturday, Sept. 12, at 12:01 a.m.

Contrasting with carriers

In recent years, carriers have been moving away from contract subsidies and have instead been spreading out the cost of a new phone with installment plans. That means the $199 advertised price for a 16-gigabyte iPhone 6s is no longer actually obtainable by a number of customers.

The new iPhone Upgrade Program is a response to that,?and it's a consumer-friendly approach that takes power away from Apple's carrier partners. With zero interest charges over two years and a completely unlocked handset, Apple's loan becomes a no-brainer for anyone who plans to buy AppleCare+ for their new iPhone.
T-Mobile has an aggressive introductory iPhone 6s payment plan, but the other carrier installment programs probably aren't worth your time.
However, some carrier installment plans may still be a better option for some consumers who do not plan on buying an AppleCare+ warranty, or who don't mind owning a locked phone.

For example, T-Mobile's Jump On Demand program is offering a special introductory discount rate for the iPhone 6s, charging $20 a month for 18 months with $0 down, for customers with qualifying credit. The carrier is also offering the iPhone 6s Plus for $24 a month.

The T-Mobile plan runs for 18 months, after which customers can pay $164 more to keep their iPhone 6s. That leaves the total cost of the phone at just $524, or $125 cheaper than the actual price of the handset. And, of course, you can add your own AppleCare+ for $129.

Why so cheap? T-Mobile is hoping you'll be so impressed by their network that you'll stick around, and presumably upgrade to the next iPhone through their plan in 2016.

The carrier is also pushing a "Lifetime Coverage Guarantee," where it offers to unlock an iPhone after the first month of service if the customer is unhappy with reception. Users will simply need to pay off the rest of the phone via interest free installments, but they are free to take their iPhone to a competing carrier.


Comparison chart via whistleOut.


Outside of T-Mobile, the other carrier options in the U.S. just aren't as competitive or clear for consumers. For starters, if you opt in to an AT&T or Sprint installment plan, your iPhone will remain locked to that carrier until it is paid off in full. Apple's iPhone Upgrade Program sells you a completely unlocked iPhone from day one.

Verizon does sell an unlocked iPhone with its plan, but it's a 24-month interest-free loan with no opportunity for an early upgrade, losing out to Apple's plan and its 12-month upgrade option.

Sprint offers an "iPhone for Life" plan that costs $22 per month and allows users to upgrade to a new iPhone whenever it launches. For a limited time, customers who trade in a smartphone can get the same plan for $15 per month until their next upgrade.

If you're not trading in a handset to Sprint, the full $22-per-month price works out to $264 over 12 months, and the addition of AppleCare+ brings the total first-year cost to $393. That's slightly more expensive than Apple and, again, comes with a carrier-locked handset.

AT&T has plans where customers can upgrade their phone, with a trade-in, after either 12, 18 or 24 months, though actually paying off the full loan takes longer than that.

An AT&T Next 12 plan for the 16-gigabyte locked iPhone 6s will cost $32.50 per month, spreading the interest-free payment over 20 months, and without AppleCare+.

Comparing apples to, well, Apple, an AT&T Next 12 customer with AppleCare+ would pay $519 over the first 12 months before they could upgrade, while an Apple iPhone Upgrade Program customer would pay $388.92 --?a savings of $130.08 for an annual upgrader.

So who should opt for a carrier plan? Someone who has no plans to purchase AppleCare+ and has no concerns about being locked into their carrier for two years or longer.

The bottom line: If you're a U.S. customer, you plan on upgrading your iPhone in less than two years, and you aren't interested in T-Mobile, Apple's iPhone Upgrade Program is your best bet, hands down. Carrier installment plans are too restrictive and confusing, while Apple's offering is simple, streamlined, and will let you get a new iPhone every year at no extra cost to you, outside of the ongoing monthly payment plan.
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Comments

  • Reply 1 of 118
    I suspect my AT&T grandfathered unlimited-data plan, which has the subsidy built in, will not get any lower when I outright purchase the phone.
  • Reply 2 of 118
    Don't you have to trade the phone back in? So you are renting the phone for the same price as owning it, but at least if you own it you can resell it after one year for 50-70% of the price which would be better than the rent/lease option apple is offering IMO.
  • Reply 3 of 118
    Quote:

    Originally Posted by mverbora View Post



    Don't you have to trade the phone back in? So you are renting the phone for the same price as owning it, but at least if you own it you can resell it after one year for 50-70% of the price which would be better than the rent/lease option apple is offering IMO.



    You don't have to trade the phone back in if you aren't upgrading at the 12-month mark. If you wanted, you could pay it off over two years (or less) and once the loan is paid, you're free to do with the phone as you please, including sell it to whomever. It's still just an interest-free two-year loan.

  • Reply 4 of 118
    Yup, it's a no brainer in my opinion.

    And a great way to work around the issue of cheaper Android phones coming onto the market that require an upfront payment. $40/m is far more palatable than a $400 upfront fee (for, e.g., the next Nexus phone), even if that $40/m is due for 24 months ($960 total). The AppleCare is a bonus. The car-like upgrade program is sweet.
  • Reply 5 of 118
    Like the first poster, I am grandfathered in to ATTs unlimited data. They are constantly trying to entice me to switch to a "newer and better" upgrade scheme. What they don't say up front is that doing so will cancel my existing data plan. I suspect that taking advantage of Apple's new no-brainer plan will do just that: show that I have no brain.
  • Reply 6 of 118
    Quote:
    Originally Posted by Robin Huber View Post



    Like the first poster, I am grandfathered in to ATTs unlimited data. They are constantly trying to entice me to switch to a "newer and better" upgrade scheme. What they don't say up front is that doing so will cancel my existing data plan. I suspect that taking advantage of Apple's new no-brainer plan will do just that: show that I have no brain.



    Considering this is an unlocked phone, and Apple, not AT&T, is the one providing the installment plan, I do not believe this program would have any bearing on your current, grandfathered contract. I obviously don't work for AT&T though, so I can't say with 100% certainty. Perhaps someone else here knows more?

     

    But what the first poster said *is* correct: Buying an unlocked phone won't lower your monthly bill on a grandfathered plan, only a mobile share plan. AT&T uses that as the "carrot" to incentivize you to switch to a capped data plan.

  • Reply 7 of 118

    Instead of trading it back in at the 12-month mark, would I have the option of paying off the remaining 12 months early and selling it myself?

  • Reply 8 of 118
    Apple's deal would give buyers an interest free loan for the phone, and they could immediately switch from AT&T as their carrier to Consumer Cellular for the far better rates on usage plans. I've moved my old 4s from AT&T to CC and there's been no difference in performance, plus my bill is now half of what AT&T charges.

    The only drawback with that scheme is that my iPad is now restricted to Wi-Fi because CC has no data coverage for iPads. I'm told that some iPads do work via cellular on CC, but, it appears to be a crapshoot whether or not yours will be one one them.
  • Reply 9 of 118
    Quote:

    Originally Posted by Cheesehead Dave View Post

     

    Instead of trading it back in at the 12-month mark, would I have the option of paying off the remaining 12 months early and selling it myself?




    Considering the total cost of the phone stays the same whether you pay it all on day one, or stretch it out over 24 months, I assume you'll be able to pay it off early. However, Apple has not yet posted the full legal terms of its plan, so I cannot say for sure.

     

    http://www.apple.com/shop/iphone/iphone-upgrade-program

  • Reply 10 of 118
    icoco3icoco3 Posts: 1,454member
    Quote:

    Originally Posted by Cheesehead Dave View Post

     

    Instead of trading it back in at the 12-month mark, would I have the option of paying off the remaining 12 months early and selling it myself?




    Yes

  • Reply 11 of 118
    I don't quite understand here ... if it is an unlocked phone, why do I have to go into a store and activate. Does this mean that if I am currently on a phone plan, I can't use my current plan and have to start a new account?
  • Reply 12 of 118
    Like the first poster, I am grandfathered in to ATTs unlimited data. They are constantly trying to entice me to switch to a "newer and better" upgrade scheme. What they don't say up front is that doing so will cancel my existing data plan. I suspect that taking advantage of Apple's new no-brainer plan will do just that: show that I have no brain.
    I kept my grandfathered unlimited data for years, but they've done a pretty good job of enticing people away. I was able to move on to one of their newer plans at a considerable discount, with a pretty good amount of data (last I check they also throttle the unlimited plan, though I'm not sure how that's changed), and was able to get access to features like tethering through iOS (no need for jailbreak shenanigans). Are you actually somehow putting the data to good use in a way that wouldn't be served by a cheaper plan? And it will almost certainly be left out from future wifi calling if they finally stop dragging their asses.

    For me, they won by basically leaving the old plan out from new features.
  • Reply 13 of 118
    What would be great is to be able to take the carrier's contract subsidy ($450 from ATT off the unlocked/no contract price of the phone) and apply it to the cost of the phone first, then use the iPhone upgrade program (or other upgrade programs) to pay off only the remaining cost.

    Either that or have the subsidy discounted from the monthly service cost, $18.75 per month, when not using the phone subsidy and when passing the two year contract period after which the phone should be paid for.

    Obviously the carrier can get the phones for less than that, but it's still a very significant amount which all these upgrade programs generally don't reflect at all.
  • Reply 14 of 118
    Quote:

    Originally Posted by elehcdn View Post



    I don't quite understand here ... if it is an unlocked phone, why do I have to go into a store and activate. Does this mean that if I am currently on a phone plan, I can't use my current plan and have to start a new account?



    You can set up your phone with your existing phone plan. I assume the requirement that you go into the store may be related to the credit check. Apple's site says you can "choose your carrier," but only shows four options: AT&T, Verizon, Sprint and T-Mobile, so I don't know about regional carriers. Here's what Apple says:

     

    "Because the iPhone Upgrade Program isn’t tied to a single carrier, you don’t need a multiyear service contract. If you don’t have any carrier commitments, you’re free to select a new carrier or stick with the one you have. A Specialist can answer questions and help you set your iPhone up the way you like."

  • Reply 15 of 118
    elehcdn wrote: »
    I don't quite understand here ... if it is an unlocked phone, why do I have to go into a store and activate. Does this mean that if I am currently on a phone plan, I can't use my current plan and have to start a new account?
    your current plan is tied with another phone which may still have installments. However, I don't believe that you need to sign up for any new plan to buy an iPhone. Why would Apple do a favor for carriers for free? Since Apple installment plan is back by Citizen bank, it's independent from carrier. That means you'll pay for the phone outside of your phone bill.
  • Reply 16 of 118
    Quote:

    Originally Posted by elehcdn View Post



    I don't quite understand here ... if it is an unlocked phone, why do I have to go into a store and activate. Does this mean that if I am currently on a phone plan, I can't use my current plan and have to start a new account?

     

    You're going into the store for the loan documentation.  They need your signature.

  • Reply 17 of 118
    Quote:

    Originally Posted by WhiteRabbit View Post



    What would be great is to be able to take the carrier's contract subsidy ($450 from ATT off the unlocked/no contract price of the phone) and apply it to the cost of the phone first, then use the iPhone upgrade program (or other upgrade programs) to pay off only the remaining cost.



    Either that or have the subsidy discounted from the monthly service cost, $18.75 per month, when not using the phone subsidy and when passing the two year contract period after which the phone should be paid for.



    Obviously the carrier can get the phones for less than that, but it's still a very significant amount which all these upgrade programs generally don't reflect at all.



    I am not sure what you think is happening, but I don't think that the carriers are getting any great deals from Apple on the cost of the phone. The subsidy is being absorbed by the carriers to entice people to lock in for 2 years of service. I highly doubt that Apple is selling the phone to the carriers at the subsidy price. 

     

    Even if it is, there is no way that Apple is going to upset their carriers by selling the phone at a cheaper price than the carriers can. Even offering this upgrade program is going to make relations pretty sticky. oth, with Verizon killing their subsidy plan, ATT working as hard as possible to push everyone to NEXT, and T-Mobile having such aggressive pricing, I think this is a strategy that Apple had to pursue.

  • Reply 18 of 118
    nhughes wrote: »

    You can set up your phone with your existing phone plan. I assume the requirement that you go into the store may be related to the credit check. Apple's site says you can "choose your carrier," but only shows four options: AT&T, Verizon, Sprint and T-Mobile, so I don't know about regional carriers. Here's what Apple says:
    "Because the iPhone Upgrade Program isn’t tied to a single carrier, you don’t need a multiyear service contract. If you don’t have any carrier commitments, you’re free to select a new carrier or stick with the one you have. A Specialist can answer questions and help you set your iPhone up the way you like."
    yes there's one thing you can do is to sign up for a BarClay credit card and get 0% for 18 months. Pay off the phone without Apple care and no carrier sign up needed.
  • Reply 19 of 118
    Quote:

    Originally Posted by nhughes View Post

     



    You can set up your phone with your existing phone plan. I assume the requirement that you go into the store may be related to the credit check. Apple's site says you can "choose your carrier," but only shows four options: AT&T, Verizon, Sprint and T-Mobile, so I don't know about regional carriers. Here's what Apple says:

     

    "Because the iPhone Upgrade Program isn’t tied to a single carrier, you don’t need a multiyear service contract. If you don’t have any carrier commitments, you’re free to select a new carrier or stick with the one you have. A Specialist can answer questions and help you set your iPhone up the way you like."




    The part that worries me is "If you don't have any carrier commitments ..."

     

    My issue is that I am planning to sell my current iPhone 6 Plus (still on contract) before I buy the iPhone 6S Plus, and am planning on using the iPhone Upgrade Program. I don't want to show up at the Apple Store and find out I have to add another phone to my plan while still carrying my current contract.

  • Reply 20 of 118
    Quote:

    Originally Posted by fallenjt View Post





    no credit check per article.



    From the article: "And of course, you'll need to pass a credit check to be approved for a loan."

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