Warning About Apple Upgrade Program

[Applejuiced]

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.

And you are surprised because?
You thought you would not have to pay taxes?
Who you think you are? Wesley snipes?🙂

 

[Jordan921]

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.

Don't see how this is a surprise to anyone. With AT&T Next you also have the pay taxes on the phone. Don't know why this is a deal breaker lol.

 

[terraphantm]

Whether you are getting a 2 year contract or a $0 down installment plan, you must pay the sales tax up-front.

In most states, a 2 year contract only requires you to pay tax on the amount you pay.

And when you lease a car for example, you pay taxes on the sum of the payments, not the value of the car. I guess the laws need to catch up (but it's not like government will willingly let go of revenue). It should be that you get a refund on the amount not paid.

 

[MICHAELSD]

And you are surprised because?
You thought you would not have to pay taxes?
Who you think you are? Wesley snipes?🙂

lol

I'm not surprised you have to pay sales tax, it's that I was expecting it to be such that you would have to pay sales tax on the payment amounts and not the full price of the phone so that if you trade the phone in early you're not paying double the sales tax you should.

 

[Applejuiced]

lol

I'm not surprised you have to pay sales tax, it's that I was expecting it to be such that you would have to pay sales tax on the payment amounts and not the full price of the phone so that if you trade the phone in early you're not paying double the sales tax you should.

Would be nice but state law mandates full amount of tax when you purchase since this is a purchase plan with option to hand in your old and start a new purchase. And expecting Apple or the finance bank to pay half or any portion of sales tax is not going to happen.
These finance payment deals are not my cup of tea. I rather buy and sell my own stuff so I don't leave any extra money on the table.

 

[PNutts]

The tax isn't the issue. It's the fact that I.e. you're paying tax on $778 when you're only paying $389 in payments. So every year you upgrade you're paying tax on $778 even though you're only making $389 in actual payments. That alone makes the program more expensive than anticipated.

Tax is the issue. This topic was interesting for a few posts but you should have the extended conversation with your government regarding your tax laws.

 

[DoofenshmirtzEI]

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.

Comparing it to AT&T's Next 12 program, which is similar, the AUP is actually cheaper on the 12 month basis, and the Next doesn't have AppleCare. Apple has backloaded the Apple Care cost into the second 12 months payments, so if you're trading in every year, you're not really paying for it.

 

[lordofthereef]

Paying taxes, to me, makes absolute sense. You pay full taxes on a car lease; we shouldn't expect anything less from a phone lease.

The forced Apple care is my big issue. I see no added value there.

 

[DoofenshmirtzEI]

In most states, a 2 year contract only requires you to pay tax on the amount you pay.

And when you lease a car for example, you pay taxes on the sum of the payments, not the value of the car. I guess the laws need to catch up (but it's not like government will willingly let go of revenue). It should be that you get a refund on the amount not paid.

Yes, but on a 2 year contract you're paying taxes on the portion of your bill that covers the subsidy. The tax man always gets you.

A lease is not a purchase. You don't own the car or phone or whatever at the end of the lease. It's common for leases to allow you to buy the car at the end if you wish, at which point you will owe sales tax on that.

 

[DoofenshmirtzEI]

lol

I'm not surprised you have to pay sales tax, it's that I was expecting it to be such that you would have to pay sales tax on the payment amounts and not the full price of the phone so that if you trade the phone in early you're not paying double the sales tax you should.

Now you know. If you finance something (so that you own it), you pay sales tax on it, but not on the payments. Financers of very expensive things (like cars) will often allow you to finance the sales tax as well, but the state still gets the tax right up front. If you lease something (you don't own it, you're just renting), you pay sales tax on the amounts you pay over time. This is a finance agreement, so paying tax on purchase is paying what "you should."

 

[CjonesHouston]

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

Yes. The government gets the taxes. Nothing new. Lol

 

[aristobrat]

How is "cold hard cash" relevant to this discussion?

You said "This does suck, but is a problem with financing programs in general."

Since you didn't quote anyone, and your reply didn't seem to be in response to the post above yours, I was assuming when you said "problem" you meant "sales tax being charged".

Since sales tax is also charged when you buy a phone with a credit card, or with cash, or with a financing program, I wasn't sure why you only called this out as a problem for "financing programs in general".

 

[jpgr15]

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

Is this a joke? Double tax? Your buying two different iPhones. Being charged tax once for each. Double iPhone = double tax.

 

[Sekelani]

That's why I spare myself the headache and buy it outright.

 

[Orien]

You said "This does suck, but is a problem with financing programs in general."

Since you didn't quote anyone, and your reply didn't seem to be in response to the post above yours, I was assuming when you said "problem" you meant "sales tax being charged".

Since sales tax is also charged when you buy a phone with a credit card, or with cash, or with a financing program, I wasn't sure why you only called this out as a problem for "financing programs in general".

I was talking about the fact that you "double-pay" tax on this financing deal if you upgrade every year, which was the OP's post.

 

[aristobrat]

I was talking about the fact that you "double-pay" tax on this financing deal if you upgrade every year, which was the OP's post.

But you don't. The tax the OP paid for this financing deal isn't any different than he would have been charged if he used cash, check, or a credit card to buy this iPhone.

 

[Streetmagus22]

The tax isn't the issue. It's the fact that I.e. you're paying tax on $778 when you're only paying $389 in payments. So every year you upgrade you're paying tax on $778 even though you're only making $389 in actual payments. That alone makes the program more expensive than anticipated.

Every year you upgrade, whether you are paying full price or financing it through Apple's Upgrade Program, or your own Credit Card, or your little sister's piggy bank, you will be paying the full tax. Let's do some math:

Let's make it simple and say tax is 10% or, $78

Apple Upgrade Plan
$32.41/24months (iPhone6S 16GB+AppleCare) + $78 Sales Tax = $855.84

Pay in Full
$649 iPhone6S 16GB + $129 AppleCare + $78 Sales Tax = $856

So in two years, it'll be the same if you decide not to upgrade after the first year.

Now, lets see how it goes if you decide to upgrade in a year.
At the anniversay, you would have spent:

Apple Upgrade Plan
$388.92 (12 months of payments) + $78 Sales Tax = $466.92

Pay in Full
$649 + $129 AppleCare + $78 Sales Tax = $856
This means you would have to sell the iPhone6S 16GB for at least $389.08 ($856-$466.92) to break even with upgrade plan.
Granted, if you sold it for more, you will be better off. If you sell it for less (bad wear and tear), you'll be worse off.


In order to get the iPhone 7:
At the end of second year.

Apple Upgrade Plan (you simply trade in your iPhone6S 16GB)
$32.41/month/12months (iPhone7 16GB+AppleCare) + $78 Sales Tax = $466.92

Pay in Full
$649 iPhone7 16GB + $129 AppleCare + $78 Sales Tax = $856 - $389.08(if you sold iPhone6S 16GB at this price) = $466.92


So it boils down to this. IF you can sell the iPhone 6S 16GB for at least $389.08 after 1 year, you would have spent the same exact amount of money.

Now, you must take into consideration the wear and tear, which easily reduces your sale price. For the trade in program, reasonable wear and tear does not affect the price (trade in value) since Apple will take it in and give you an upgrade. This scenario also assumes the price of the iPhone 7 will be the same price at launch day as the iPhone 6S at launch day.

 

[eyedoc2020]

When you lease something there is always small print and extra fees. Like just about everything in life, it is always better to pay cash and buy the item outright. Over the long haul it is cheaper.

 

[DoofenshmirtzEI]

When you lease something there is always small print and extra fees. Like just about everything in life, it is always better to pay cash and buy the item outright. Over the long haul it is cheaper.

This is not a lease, it is a purchase that is financed.

It is not always better to pay cash. When the cash price and the 0% financing price are the same, yes, please, I'll take the 0% financing.

 

[terraphantm]

Is this a joke? Double tax? Your buying two different iPhones. Being charged tax once for each. Double iPhone = double tax.

But you don't keep two different iPhones if you turn in the phone at the end of the year. You effectively pay twice the tax rate on the payments you did make.

Yes, but on a 2 year contract you're paying taxes on the portion of your bill that covers the subsidy. The tax man always gets you.

A lease is not a purchase. You don't own the car or phone or whatever at the end of the lease. It's common for leases to allow you to buy the car at the end if you wish, at which point you will owe sales tax on that.

For those of us who are still on the older plans, the tax on the monthly bill is more or less constant.

And even if this plan isn't considered a lease, when you trade in a car and buy a new one, you only pay taxes on the difference (at least in my state). Same applies if you for example exchange an item at a store for a more expensive one during the return period.

 

[jpgr15]

But you don't keep two different iPhones if you turn in the phone at the end of the year. You effectively pay twice the tax rate on the payments you did make

Yeah.. but you essentially resell your phone to Apple in exchange for forgiveness of your remaining balance.

Whether you sold your phone privately or to Apple you're paying sales tax twice so what's the difference?

 

[sketdansuu]

I think there is absolutely a valid argument on paying the phone in full, however for me personally, I can't sell anything for the life of me because I'm paranoid and I think every potential buyer will screw me over. This program gives me an easy out from the anxiety of trying to sell a high price item like an iPhone.

 

[Bryan Bowler]

Every carrier installment plan makes you pay the tax on the phone up front too, whether you pay it off or trade it in and upgrade- and again full tax on the upgrade phone up front.

You don't pay all of the tax upfront on T-Mobile's Jump on Demand program, rather, you pay tax on whatever that month's payment is. The way this particular T-Mobile program is structured must fall under a different tax code.

 

[OldMike]

You don't pay all of the tax upfront on T-Mobile's Jump on Demand program, rather, you pay tax on whatever that month's payment is. The way this particular T-Mobile program is structured must fall under a different tax code.

I believe T-Mobile's Jump program is considered a lease instead of a financed purchase. At the end of the 18 months, you don't actually own anything.

 

[DoofenshmirtzEI]

And even if this plan isn't considered a lease, when you trade in a car and buy a new one, you only pay taxes on the difference (at least in my state). Same applies if you for example exchange an item at a store for a more expensive one during the return period.

Yes, but that's only if the trade in reduces the selling price of the new car. In this case, the trade in is in lieu of being required to pay off the balance on the phone you are trading in. It's like bringing a trade in to a car dealer that still has a loan on it. If it is worth 10K, and still has a loan of 10K on it, the dealer will take your trade and pay off your loan, but you're not getting a break on the price of the new car, and thus no break on the sales tax.

This is not a lease, it is a financed purchase, ergo, you pay sales tax on the purchase price.