Is Apple’s iPhone Upgrade Program Worth It?

Apple’s iPhone launch day has arrived, which means millions of people are switching to the new iPhone 13. If this is you, you have a plethora of options to buy it, including the IPhone Upgrade Program, which starts at less than $ 40 per month.

First introduced in 2015, the upgrade program allows customers to pay for their iPhone in 24 monthly installments. For this year’s iPhone lineup, that means the $ 699 iPhone 13 Mini with Apple Care coverage starts at $ 35.33 per month, while the larger $ 799 iPhone 13 starts at $ 39.50. . The flagship iPhone 13 Pro starts at $ 49.91 per month and the larger iPhone 13 Pro Max starts at $ 54.08.

After making 12 payments, customers can either continue to make payments until full ownership of the phone or return their “old” phone to Apple in exchange for the latest model. Once this is done, the 24 month payment period begins again.

Part of the reason Apple introduced the program is that it ended up with a massive customer base who were happy to keep their existing iPhones for several years, limiting the number of people who would buy a new phone each year. With the upgrade plan, which significantly reduces the financial barrier to entry, Apple hoped to reduce the sticker shock of getting the latest phone.

“It’s starting to look more like the traditional way of getting it through the carrier,” Apple CEO Tim Cook told CNBC in 2019. “So you end up with an amazing new phone that’s so much better. than what you had for $ 20, $ 30 a month or so. “

Here’s how to decide if the upgrade program is right for you.

In addition to giving you a premium iPhone every year, the main attraction of Apple’s installment plan is its affordability. While you still pay the full cost of the phone during the term of the contract, there aren’t any triple-digit charges hitting your wallet at the same time.

The program also offers a lot of convenience, with Apple making the return process easier by sending you a box and a shipping label to return your old iPhone. The retailer can also pick it up for you at an Apple Store.

Apple will accept the iPhone even if it shows normal wear and tear, provided it is still in working order. Considering that a phone’s condition has a big impact on its resale value, Apple’s plan may appeal to people who tend to drop their devices or don’t like to keep their phones in cases.

And with Apple Care + insurance – which includes hardware coverage and accident protection – factored into the price as a smaller monthly payment rather than a lump sum of up to $ 199, you can shell out a lot less money at a time while making sure you are protected.

The main downside of the upgrade program is that until you make all 24 payments, you don’t own your iPhone. This means that you cannot resell it, give it away, or do anything to it that would impact Apple’s ability to someday sell it to another customer.

Your iPhone’s resale value may be over 50% of the phone’s price, especially if you’ve taken good care of your device. If this is the case for you, when you trade in for a newer model after paying half of it, you lose the additional resale value.

While the amount you can save varies from model to model and the condition of your phone, the difference between exchanging the upgrade plan and reselling your phone yourself can be as high as 75. $ or $ 100.

When asked to comment on the type of consumer the upgrade plan is best suited for, an Apple spokesperson asked CNBC Make It to Press release on iPhone pre-orders.

The plan is also designed to keep you in the Apple ecosystem, which the company is constantly monetizing in the form of a growing number of subscription services, including Apple TV +, Apple Music, and Apple News +. By making a long-term commitment to the iPhone, you may be setting yourself up to spend more money with Apple in the future.

“Ninety-seven percent of Apple customers, once they’re on an iPhone, stay on an iPhone,” Wedbush Securities analyst Dan Ives told CNBC Make It. “This is Apple looking to get more into the consumer spending ecosystem.”

You don’t have to buy your phone directly through Apple. The major US carriers all have their own versions of an upgrade plan. While they’re largely similar to Apple’s plan, they don’t offer Apple Care + coverage.

Here is a look at a few versions of popular carriers.

• AT&T: The carrier installment plan has 36 monthly payments instead of 24 and, like Apple, allows customers to upgrade after 50% of the cost of the device has been paid. AT&T charges a monthly fee of $ 5 on top of the cost of the phone in exchange for the ability to upgrade.
• Verizon: Verizon’s plan requires customers to pay 50% of the cost of the iPhone before upgrading.
• T Mobile: Customers who want the latest iPhones are offered 18-month contracts to pay for their phones and are required to pay a deposit when they receive their device. The payout ranges from $ 100 to $ 150, depending on the model you select.