gordy

sirozha said:

Who will be paying for it? If Apple sells a $800 phone and gets paid 1/24 of the total price per month, they won’t bag the entire price until after 2 years. This will take more than two years to ramp up until Apple starts collecting the same amount per month as they would if they sold the iPhone outright. 

I don’t know if this can be considered a sign of strength. From the automotive perspective, when a company does 0% financing, its usually a sign of weakness via-a-vis consumer demand for the cars. When there’s strong demand, automotive manufacturers usually don’t offer 0% interest deals. 

Apple is basically lending money to their customers for free, which is not something that any manufacturer would ever do unless they are expecting sagging demand for their product. The 0% financing is a way to stimulate demand. Apple pays to manufacture the iPhone upfront, but doesn’t get to recoup its costs for over a year and doesn’t make all the profit until after two years. 

The more I think of that, the more I see this as a desperate measure to prop up sales. This is also a way to push the premium product downmarket to the people who would not normally consider expensive toys like these and try to squeeze the profits out of them using this zero interest rate trick. 

Why wouldn’t most people take advantage of this deal? Even if I have a grand or more to blow on a new Apple iPhone, why would I not instead pay Apple a little per month? I don’t get any benefit for paying for the iPhone outright anymore. I won’t get punished for financing the phone. 

But what happens if people take this deal in masses? This could result in a huge hit to the bottom line in the first two years.