Convenience and insurance: The real price of the iPhone Upgrade Program

There has been a lot written about the new Apple iPhone Upgrade Program and I'm sure many customers will be padding the Apple coffers starting today. I won't be one of those.

I purchased an iPhone 6s Plus to replace my iPhone 6 Plus, but I paid full price for it through Apple and I will explain why in more detail below. It's understandable that Apple is offering the iPhone Upgrade Program given that US carrier contracts are going away and carriers are financing iPhones directly.

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AppleCare+ protection

Apple wanted a piece of the payment plan action and while carriers, and Apple, offer no-interest payment plans, Apple also requires that iPhone buyers purchase the AppleCare+ protection plan and that's where Apple will see a major profit.

I regularly see broken iPhones and understand that people want protection from breaking a very expensive device. However, I also see most people wrap their iPhone in a case and as ZDNet's Jason Perlow writes every year, you can provide protection with a rugged case. A case is a less expensive option than AppleCare+.

We all know that insurance is a highly profitable business and most of us pay into insurance without ever requiring reimbursement. AppleCare+ costs $129. If you damage your device, then a service fee of $99, plus tax, is charged for up to two incidents in a two-year period.

Did you know that you can skip the insurance and pay Apple $149 to have your broken iPhone 6s or 6s Plus display replaced? Yep, that's less expensive than buying the AppleCare+ coverage and paying the service fee. Here's a table comparing up to three iPhone 6s/6s Plus screen replacements with the total cumulative figure in parenthesis.

I purchased the AppleCare+ protection a few times over the years and have never used it. Actually, if I had skipped buying the protection plan over the years my iPhone this year would have been free.

There are also other insurance options for iPhone owners, including SquareTrade, Esurance, possibly your credit card provider, and even your homeowner's insurance.

Convenience

The hard sell of the new iPhone Upgrade Program is that you can trade in your iPhone each year for the new model. While I understand that smartphone enthusiasts, and most readers of this site, like to upgrade regularly almost every other person I know who has an iPhone is on a two-year upgrade cycle. The phones are very good and can easily last a person a couple of years.

Actually, if you are on a two-year upgrade plan and like the peace of mind of AppleCare+, then the iPhone Upgrade Program has the same value as paying your carrier on a no-interest plan or buying the phone outright. You will own your iPhone after the two years of payments is completed.

The real loss is for those who upgrade each year. It will be easy and convenient to walk into an Apple Store and hand Apple your iPhone to get a new one. However, that convenience costs you, as shown in the table below.

No one should buy the 16GB iPhone 6s/6s Plus and the 128GB model is targeted to those who carry everything on their device. Thus, this representative table below just looks at the recommended 64GB models.

So if you trade in your iPhone 6s/6s Plus after one year, you will have paid $438.96 or $489. This assumes you never used the AppleCare+ protection either. Priceonomics has a table showing how quickly a phone may depreciate and as you can see in the tablethe iPhone only loses about 30 percent of its value after one year.

I sold my iPhone 6 Plus for $630 on Swappa, original price was $850, so only spent $220 for a year of use. I could have gotten more, but wanted to sell it fast. You can also usually get more on eBay. If you sell to Amazon or Gazelle, you get much less. However, even with Amazon or Gazelle, you are likely to lose less than the $438.96 or $489 after one year of use.

I did not include sales tax in the table, but here in WA State that is a significant figure. I paid $78 in tax for my 64GB iPhone 6s Plus. Keep in mind that sale tax is added to your first monthly iPhone Upgrade Program payment too.

CNET has a convenient comparison between the iPhone Upgrade Program and carrier payment plans. As you can see, if you don't need the protection then your carrier is the best alternative for monthly payments.