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Warning About Apple Upgrade Program

MICHAELSD

MICHAELSD

macrumors 603
Original poster
Jul 13, 2008
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NJ
The Apple Upgrade Program seemed like a pretty decent deal... Until you dig deeper into the fine print that isn't even available on Apple's site. Here's the deal-breaker for me: in addition to the advertised monthly payments, you have to pay for taxes on the iPhone and AppleCare in full at the start of your payment period. This is not news to anyone who has already signed up for it, however here is where the deal falls apart: you have to pay the taxes in full each time you upgrade. So even if you upgrade annually and only pay off 12 payments on the plan, you still owe the sales tax for the full 24 payments which adds a cost of at least $100/year.

What seemed like it would save me the convenience of having to sell my iPhone annually at a minimal cost is made much less of a convenient value by the double-charging of sales tax.

Also, any even minor visible wear and tear will require a $99 replacement to trade in.
 
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Makes sense to me. Through the Apple Upgrade Program, you are financing the purchase of a phone, and purchase of AppleCare. No matter what, applicable sales tax is collected on both purchases.

If you take advantage of the program and re-up after one year, sales tax still has to be paid on the new purchases.
 
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CNeufeld said:
I'm curious... If you don't use the plan and instead buy a phone in full each year (to resell when the next one comes out), you're in exactly the same situation, aren't you? You pay the taxes up front and don't recover that back.

C
Click to expand...

But you have the phone to sell. With the upgrade you do not.
 
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ZipZap said:
But you have the phone to sell. With the upgrade you do not.
Click to expand...

THAT'S the bigger issue with the program, but that's hardly a "hidden" fine print thing. It's the whole premise of the program. Trade in your phone every year for a new one. No hassles trying to wring out the best deal on your existing phone.

Of course, you still have that option with the program. Figure you can sell it for more than you can get by trading it in? No problem. Sell the phone to pay for the phone loan (0% interest) at the one year mark (I think you can pay off in advance), get another phone. Problem solved. You don't HAVE to trade your phone in. You can even sell the phone and continue making payments (again, interest free) and keep the cash, if you like.

C
 
ZipZap said:
But you have the phone to sell. With the upgrade you do not.
Click to expand...
So it boils down to two factors.

1. Buying the phone outright, you could opt to skip AppleCare. Chances are you'd be better off without.
2. Buying the phone outright, you have the hassle/expense/risk of selling the phone privately.

Depending on the resale price of the phone, it is probably best to do it yourself... but the gain may not be worth the time invested.
 
Much like what a number of people said. At the point of sale, the State doesn't care if you financed it or not - they're out for the tax revenue that comes with it. Otherwise, if the bank simply assumed the amount of tax paid onto the loan itself, and lets you walk after 12 months, that means the bank is paying 50% of the tax that you, as the consumer, should have paid. Rather than pay for your tax due, they'd rather you pay the tax first, then owe the bank after.
 
Another note on AppleCare: it's pointless if you use a case IMO and if you're upgrading every year you're paying the $129 for no reason since the AppleCare's main cost is extending coverage for an extra year.
 
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I don't see the problem here. You pay all the sales tax up front for the 6s. 12 months later, you pay all the sales tax up front again for the iPhone 7. Not any different than paying in full for the iPhone every year except I don't have to mess with the hassle of trying to sell my phone somewhere or use a bunch of Amazon credit, plus I get Applecare+.
 
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MICHAELSD said:
...here is where the deal falls apart: you have to pay the taxes in full each time you upgrade. So even if you upgrade annually and only pay off 12 payments on the plan, you still owe the sales tax for the full 24 payments which adds a cost of at least $100/year......
Click to expand...
If you buy the iPhone and pay in full but plan on selling it in a year does Apple prorate the sals tax in ½?
 
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Julien said:
If you buy the iPhone and pay in full but plan on selling it in a year does Apple prorate the sals tax in ½?
Click to expand...

I'm guessing no. You are trading in to pay the remaining balance on your current loan, not to reduce the cost of the new phone. If it ends up that way somehow it'd be great but I doubt it.
 
MICHAELSD said:
Another note on AppleCare: it's pointless if you use a case IMO and if you're upgrading every year you're paying the $129 for no reason since the AppleCare's main cost is extending coverage for an extra year.
Click to expand...
I wouldn't exactly say the case is useless, but the AppleCare part of the question is a good one. If you're on the upgrade plan, it means that you're paying for 2 years of coverage for only one year (since it's assumed you're upgrading every year) AND you're moving your warranty from limited to full coverage (limited + accidental). You'd be paying for the price of the case when you pay the deductible for the replacement. You do lose money if you bought a case, and the next iPhone's measurements change (which will more than likely be fact as we move from 6S to 7)
 
aesc80 said:
I wouldn't exactly say the case is useless, but the AppleCare part of the question is a good one. If you're on the upgrade plan, it means that you're paying for 2 years of coverage for only one year (since it's assumed you're upgrading every year) AND you're moving your warranty from limited to full coverage (limited + accidental). You'd be paying for the price of the case when you pay the deductible for the replacement. You do lose money if you bought a case, and the next iPhone's measurements change (which will more than likely be fact as we move from 6S to 7)
Click to expand...

You're only paying for one year of coverage since its divided into the payments.
 
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MICHAELSD said:
What seemed like it would save me the convenience of having to sell my iPhone annually at a minimal cost is made much less of a convenient value by the double-charging of sales tax.
Click to expand...

You aren't double charged sales tax. The government does not accept being paid their taxes over the course of time. An item of $699 (or whatever model you get) is being exchanged and that is the amount the government needs to collect from that exchange. You could argue that with a credit card, you can make payments over time without owing tax up front, which Apple does offer their own store credit card or you can use your own, but you cannot exchange that phone for a new one and in most cases you are owing interest, unless you get an interest free period.

This is just how a lease works.
 
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nrvna76 said:
I'm guessing no. You are trading in to pay the remaining balance on your current loan, not to reduce the cost of the new phone. If it ends up that way somehow it'd be great but I doubt it.
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You misunderstood so I will try again. If you go on Amazon and buy a TV but only plan on keeping it for 1 year and then selling it can you pay less sales tax? The answer IS NO. You pay the sales tax for the full amount on any item you buy.


Also Apple is NOT offering a lease. It is a finance (buy) program in which Apple agrees to buy the iPhone back from you for the balance owed.
 
Orien said:
This does suck, but is a problem with financing programs in general.
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Considering you have to pay sales tax each time you upgrade, even if you pay with cold hard cash, I'd say the "problem" is a little more widespread than financing programs. :)
 
This is not news. In fact, this very topic has already been discussed. I believe that the OP of that thread had stated that apple had cheated him. Yup.
 
Julien said:
You misunderstood so I will try again. If you go on Amazon and buy a TV but only plan on keeping it for 1 year and then selling it can you pay less sales tax? The answer IS NO. You pay the sales tax for the full amount on any item you buy.


Also Apple is NOT offering a lease. It is a finance (buy) program in which Apple agrees to buy the iPhone back from you for the balance owed.
Click to expand...

Sorry, I thought you were asking a serious question so that's what I responded to.
 
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