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Apple's New Upgrade Program: Is It Worth It?
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If you decide to keep the phone at the end of the lease do you owe the remaining balance in one payment? Or can you opt into an installment plan come that time? Not sure if this has been questioned/mentioned.
If you don't pay the rest off in full at the end of the lease, Klarna will split out 6 more payments automatically, and then you'll have to pay the remaining balance at the end of that.
Rossmon
macrumors member
I use puretalk which has really excellent service from native english speaking Americans and costs me $28/month. Apple has never let me buy a phone on any of their offers using my plan! Only the expensive plans are offered. Now that really drives up the cost for their upgrade program.
TruthAboveAllElse
macrumors 6502a
I don’t understand what you’re not getting. The total of the monthly payments plus the balloon payment at the end add up to only the amount you’d pay if you pay up front. Normally when you lease something you pay for the depreciation. Here you aren’t paying for the financing at all. The only way it could be better deal would be if Apple discounted it for leasing it, but that makes no sense because Apple has to wait for the money rather than getting it up front. Why would they discount how much you have to pay to buy it out at the end???
Since the trade-in values were higher than 50% of the original price in the last cycle, how easy will it be to pay Klarna off so that the phone can be traded in when upgrading is an open question.
This also brings a big unknown around the trade-in/ return process: will Apple Store employees be able to inspect your phone and send it back to Klarna or will we need to do it on our own and wait for Klarna's inspection? Historically, when upgrading through the iPhone Upgrade Program, Apple has been pretty lenient with scratches and dents as long as the front and back glass were not broken, even though those particular phones didn't have a trade-in value. If Klarna is the decision maker, they might charge for any imperfection and, assuming AppleCare+ coverage was in place, it may not be that bad but might cost up to $99.
To compare the new lease program with the iPhone Upgrade Program:
- 12 months lease vs. upgrading every year is pretty much a wash since the lease payments pay for roughly 50% of the phone's value, also assuming an easy return process/ no additional charges.
- 24 months lease vs. keeping the phone until the loan is paid in full: that's the hard one and a bet that the phone will be in good shape and worth more than the fee to keep it.
One other aspect that is not talked much about is that the iPhone Upgrade Program REQUIRED payments to be made by credit card, so assuming payments with the Apple Card, a 3% rebate was baked in. This is now gone since Klarna requires payment by ACH or debit card.
Lastly, as others commented, it may be that Apple is preparing us for higher iPhone prices. My take is that they are also doing this to push people into purchasing the AppleCare one plans by decoupling the included ApppleCare+ in the iPhone Upgrade Program, not to mention that carriers didn't like it as it competed with their overpriced protection plans.
Assuming Apple will keep the installment plan through the Apple Card available, it may be the better option.
I did the math on T-Mobile’s most expensive plan that allows yearly phone upgrades (Experience Beyond) which typically offers a $800 incentive when financing a new phone. For comparison purposes, I am not using a trade-in and only considering the financing of a $1,100 iPhone 17 Pro.
We would need to switch from our current plan which doesn’t offer phone upgrade credits to one that will cost $35 more per line compared to our legacy one. Adding $300/24 which is the difference between the phone’s cost and the $800 credit, we will end up paying $47.50 more per month per line if we all upgrade at the same time or $35 more if we do not (waste of money in that scenario). The first 12 payments will total $570 per line which is $20 more than 50% of the cost of the phone. Funny how close those numbers are when comparing to Apple’s programs.
If T-Mobile makes money from our legacy plan, don’t you think they thought about all these phone financing scenarios and the credit amount for getting a new phone? Everyone pays one way or another, either from Apple by using their installment program, through the IUP or now through a Klarna lease, or through a carrier by paying for a costlier plan.
I didn’t do an analysis for financing through AT&T or Verizon but their 36 months financing scheme appears to be more expensive in the long run. T-Mobile is the closest to Apple’s programs, even though it only makes sense if upgrading yearly or every other year on their Experience More plan.
We have choices. Which one is better depends on someone’s habits and preference.
sdfox7
macrumors demi-god
The average person doesn't buy a new iPhone every year.
Apple is trying to change that.
If you buy a new iPhone every year, this program might make sense.
If you enjoy having an iPhone for several years, paid off, this program doesn't make sense.
Apple wants you to give them money every month. That's the point of this program.
The End.
Apple is trying to change that.
If you buy a new iPhone every year, this program might make sense.
If you enjoy having an iPhone for several years, paid off, this program doesn't make sense.
Apple wants you to give them money every month. That's the point of this program.
The End.
The optional "buyout price" is the original retail price less payments made. Using 256GB iPhone 17 Pro as an example, a 12 month lease is $45.99/month. After 12 months, you would've paid $551.88. The original retail price of phone is $1,099. $1,099 - $551.88 = $547.12. $547.12 is the buyout price. You are paying nothing extra to lease, and are getting 0% APR for lease term.
TruthAboveAllElse
macrumors 6502a
Yes, so does nearly everything. But why would you get a discount for having leased it first? If it loses more value than Apple anticipated, you can just give it back. If it loses less then you can pay the balloon payment and keep it or sell it yourself. But, in no world would it make any sense to be given a depreciation discount on something that you've had since it was brand new. If you buy it new, you have to pay $1099 or whatever the price is up front, here the price is being split up over 12 or 24 months (presumably what apple expects depreciation to be) and then you give it back having paid for the depreciated value. If you think it's a better deal to keep it and resell it (if it depreciated less than what you paid) then you keep it and use or sell it. But you don't get a discount for having deferred your purchase for something you got brand new. (Except since there are no finance charges, you actually have gained money because the value of the dollar will decrease during the time you have been leasing.) If it depreciated more than what you paid, then you got a very good deal on the payments.
Example:
Phone Price when new: $1099
Lease payment: $31.99 for a 24-month lease.
Total lease payment: $767.76
Balloon payment due at end if you don't want to return: $331.24
The $767.76 is the depreciation Apple anticipates.
If it depreciates less, say only 50%, it is worth $549.50, and you have overpaid on the lease by $218.26. Therefore, you should pay the $331.24. If you turn it in, you have paid more than it depreciated. So it depreciating less is bad for you as a lessee, but you can turn it around by buying it out, and then you lose nothing because you only pay a total of $1099, the same if you paid upfront.
If it depreciates more, say 80%, it is worth $219.80. Since your cost to buy it out is more, you should turn it in. As a lessee, a higher depreciation than the cost of the lease is to your benefit since you paid a lease based on $767.76 in depreciation, when it actually depreciated $879.20. However, you can still decide to buy it out, and you are no worse off than if you paid the $1099 up front.
The way it works is nothing like what you have been saying. If anything, Apple has set the depreciation higher than it will really be, in order to mask finance charges, figuring that most people will just turn it in. But since you have to option to buy it out, it can be a good deal no matter what, if you understand how leasing works.
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ive had a 15 pro max for a couple of years now. apple gave me $490 for it and applied that to the lease of the 17 pro max 256gb. i am paying $9.71 per month for the next 12 months. then i can buy it out for what remaining is due or upgrade. im also happy to report the phone was unlocked and i just ignored the tmobile sign up screen and installed my mint esim.
Even Apple discount heavily on old products in one year and that's why they want you to keep leasing them instead of buying them. I guess you still cant understand the point.
TruthAboveAllElse
macrumors 6502a
Please re-read my post as I added an example. I think it will make it clearer. There is no world where you get a depreciation discount on a leased iPhone. The depreciation being greater than expected is to the consumer's benefit. The lease is a good deal for the financially literate. For uninformed, it can be not as good a deal, but there are no finance charges, and if you buy it out, you never pay more than the upfront cost.
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You failed to justify your statement. I'm not sure what to say when they want you to pay at full at the end while the value changes. Clearly, check the post again.
You're not paying "at full" at the end, you're paying the lease end value which is roughly the device's lower used value at that point. This is clearly shown in other posts on this topic. If the phone holds its value better than expected, you may end up paying less at lease end than what it's actually worth at the time. If the phone depreciates more than expected, you have the option to just turn it in and let Klarna deal with the "loss" (lower than expected resale value).
If someone chooses to buy the phone at lease end then this is essentially an interest free balloon financing loan. However, because the customer is given the choice of buying or turning the phone in and walking away (depending on wants/needs, phone's resale value, etc.), it's considered a lease.
Wrong, all Apple products will lose value every year and you need to pay at full at the end to cover the entire price. The value itself does not change when you start paying which means you are forced to pay fixed value at start.
TruthAboveAllElse
macrumors 6502a
You pay the remaining amount owed on the phone to keep it, effectively turning the lease into a loan. There are absolutely no finance charges. And given that you have the option of just turning it in, if you’re unsure how much it will depreciate, or unsure if you’ll want to keep it, it may make more sense than a 0% loan. Can you explain exactly what you think happens?
How it sounds to me is that you understand that the phone is $1099 at start, you understand that you pay most of the price before the buyout at the end, but you feel that you should be given a discount because the phone is worth less now. But it is possible you have misinterpreted something.
Given that you do understand all that, the phone depreciated its value while it was in your possession. This is why you don't get to pay less than the remainder of the phone.
If I have something I am going to sell you, and you want to pay me over time, I'm not going to charge you less because you don't give me the money up front, if anything I would want to charge you more. I'm not sure why you think this is unfair.
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Apple products lose value and after 12 months you are only paying the "lost value" figure or roughly what it is worth used at that time.
When someone pays full price upfront for a device, Apple doesn't turn around 12 months later and give them a refund because the product lost value. Similarly, there's no reason they'd do it for leasing.
Using 256GB iPhone 17 Pro as an example:
Customer #1 (pays full price upfront)
Gets new phone day one and pays full price upfront. Total paid $1,099. After 12 months, it may be worth $550 or so.
Customer #2 (leases through Upgrade program)
Gets new phone day one and pays $45.99/month for 12 months at 0% APR and then $547.12. Total paid $1,099. After 12 months, it may be worth $550 or so.
In both cases by 12 months, each customer had gotten a new phone on day one, paid the same $1,099 and has a device worth the same.
It really shouldn't be this difficult for you to comprehend.
apple4everOG
macrumors member
Abazigal
Contributor
There are certain situations where I feel like I genuinely do not mind this. For example, I used to be subscribed to a variety of streaming platforms, I have since stopped paying for them, and I don’t “own” any content to show for it. However, the overwhelming majority of content on those platforms is so bad and lacklustre that I likely have no interest in holding on to any of them anyways. I watch them once, I move on, and I doubt I would ever come back to revisiting them.
Same thing with “hardware subscriptions”. If you told me that I get a new laptop every few years, and I don’t have to worth about disposing of my older laptop or having it take up space at home, I would be intrigued by the prospect. Convenience and ease of mind is the key selling draw here, not ownership.