Data suggests Apple's iPhone Upgrade Program has moved 250K units

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in iPhone
New data from Citizen's Financial Group suggests Apple's loan partner has financed some 250,000 iPhones through the newly launched iPhone Upgrade Program, according to calculations from investment firm Piper Jaffray.



CFG announced on Friday that it had $220 million in Apple iPhone loans on its balance sheet at the end of December. To analyst Gene Munster of Piper Jaffray, that implies Apple sold about a quarter-million iPhones through the new upgrade program since it debuted in September.

Munster estimates that the total number of iPhones sold through the program would represent between 3 and 5 percent of iPhone 6s units purchased in Apple Stores during that period.

"Overall we view this as a stable start to the program given it is just the first quarter of availability," Munster wrote in a note to investors on Friday, a copy of which was provided to AppleInsider. "We continue to expect the percentage of phones sold on the Upgrade program to increase throughout (calendar year 2016)."

Munster has high hopes for the iPhone Upgrade Program for three reasons:

  • The program just launched in September, and it will take time for employees to learn how to sell it properly.
  • Most consumers stay with their carriers for the long haul, so it will also take time for customers to learn the benefits of the interest-free loan.
  • Many U.S. consumers are still locked into carrier agreements, and some will switch once their two-year commitments have expired.





Apple's new iPhone Upgrade Program is an interest-free, two-year loan, covering the cost of a new iPhone as well as AppleCare+ extended warranty. The cost of the phone and warranty are spread out over 24 payments, and users have the option to trade in their phone and upgrade to the latest model after one year.

AppleInsider analyzed the iPhone Upgrade Program last fall and found it's a great deal for consumers who plan on buying AppleCare+ and would like to upgrade their iPhone once per year. Of particular interest is the fact that the iPhone sold through the program is unlocked, meaning customers can switch carriers or use their handset internationally at any time, with no contract commitments or restrictions.

Munster believes that Apple's program, along with carrier upgrade plans, will push the average iPhone upgrade cycle from 22 months in the U.S. today to 15 months over the next four years.

Comments

  • Reply 1 of 13
    nhughesnhughes Posts: 750editor
    sog35 said:
    Apple needs to ad this program to iPad.

    I want to upgrade my iPad but I hate selling my old iPads on the open market.

    Something wrong with the math

    $220,000,000 divided by $750 = 300,000 units

    If Musters is right about 250k units then the average loan is $880
    The loan is for an iPhone 6s plus the cost of AppleCare+ ($130). So he's assuming the iPhone ASP for iPhone Upgrade Program early adopters is $750. Not an unreasonable assumption.
    latifbp
  • Reply 2 of 13
    maestro64maestro64 Posts: 4,476member

    I know we did this, it made more sense than doing a deal with AT&T, at the end of this year my AT&T will be contract free once the other phones come off contract.

    SOG, apple does offer similar thing for ipad and Mac, you can get 6 to 18 months free financing on those products. I have done this with kids computers. The Ipads just work and there is no reason to upgrade, It like my Mac;s which I usually have for 6 to 8 yrs before I feel the need to upgrade. I have an ipad 2 and see no need for upgrading. Also does your math factor in the cost of the Apple care plans which come with all new phones on this plan.

  • Reply 3 of 13
    volcanvolcan Posts: 1,770member
    250K seems like a low number.
    bobschlobcali
  • Reply 4 of 13
    kpomkpom Posts: 616member
    Of course, that also assumes that CFG is holding onto all of its loans and not selling them in securitizations. I haven't read their disclosure, but that's a real possibility.
  • Reply 5 of 13
    kpomkpom Posts: 616member
    volcan said:
    250K seems like a low number.
    My guess is that the carrier installment programs are more popular since they don't require AppleCare+.
  • Reply 6 of 13
    It's how I plan to buy my next iPhone once my AT&T Next contract expires in December.
  • Reply 7 of 13
    kpom said:
    volcan said:
    250K seems like a low number.
    My guess is that the carrier installment programs are more popular since they don't require AppleCare+.
    But if you do the math Apples plan even with apple care is cheaper for a 12 month upgrade cycle. Also I had a friend go to the apple store and they told him if he traded after 12 months that he still owed the last 12 months of payments which is not true - Even the apple stores can't get the info correct!
  • Reply 8 of 13
    I did this and am happy.  It's  little more expensive because you pay at the annualized rate of the full cost and lose the offset of selling your phone after two years assuming you upgrade every year within the program.  But it's one less thing to be tied to the carrier which is great.  I trust Apple more than ATT.
  • Reply 9 of 13
    I did this and am happy.  It's  little more expensive because you pay at the annualized rate of the full cost and lose the offset of selling your phone after two years assuming you upgrade every year within the program.  But it's one less thing to be tied to the carrier which is great.  I trust Apple more than ATT.
    You can keep and sell your phone after 2 years and it is cheaper than and of the other carrier options like Next etc.
    latifbp
  • Reply 10 of 13
    Pity this scheme is US only—we could do with it in Japan where the carriers have long had a stranglehold on locked phones, although the government has just recently forced them to grudgingly unlock after 6 months into a 2-year contract.
    Unlocked phones can be got for a high up-front price from Apple Store Japan online but most Japanese consumers have been so conditioned to accept locked phones on 2-year contracts that almost nobody takes the other option, and so the market stays locked and undisrupted.  You can't even buy a prepaid (non-contract) voice + data SIM here due to an archaic 2006/7 law. 
    Apple should start this scheme in Japan and partner with a MVNO to supply SIMs.  Also, it should pressure the Japanese government to repeal the stupid law.
    cali
  • Reply 11 of 13
    ksecksec Posts: 1,551member
    Please can I have this roll out worldwide?
    I buy an iPhone, Choose My carrier, that it. ( And it would be great if those prices comes with iCloud Backup )
  • Reply 12 of 13
    latifbplatifbp Posts: 544member
    sog35 said:
    Apple needs to ad this program to iPad.

    I want to upgrade my iPad but I hate selling my old iPads on the open market.

    Something wrong with the math

    $220,000,000 divided by $750 = 300,000 units

    If Musters is right about 250k units then the average loan is $880
    iPads are much harder to sell and get a decent price for on the open market. I loathed trying to sell my iPads on Craigslist, while selling my old iPhone's was always very easy and I had plenty of buyers. 
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