Carrier What's the catch of Apple Upgrade Program?

techiebug

macrumors 6502a
Original poster
Oct 20, 2013
729
258
Hey guys, so currently I'm looking into the Apple Upgrade Program. I used to think it's the worst option to buy an iPhone judging from Apple's pricing scheme. But it turns out this is a decent deal to get a new iPhone. I need help to understand what the catch of this is. So the only phone I'm interested is the 7 Plus 128gb. Monthly payment for 24 months is $41.58. Over 24 months I'll pay a total $997.92. And this includes Applecare+. Now if I pay the phone upfront, total cost is $938.52 including tax. So the total cost under Apple Upgrade Program is $59.4 more. That's not expensive at all considering it also has Applecare+ and I don't have to deal with reselling next year. I heard there's an enroll fee of $50 or something. But still it's not too bad of a deal. What's the downside of this??
 

techiebug

macrumors 6502a
Original poster
Oct 20, 2013
729
258
You're charged tax upfront on top of 24 x $41.58 so you need to include that in your calculation.

There's no enrollment fee though.
Oh I see. So factoring in tax, total cost under Apple Upgrade Program is $1077.75 So it's $139.23 more than paying upfront. This amount is about the same as the cost of Applecare+. $139 is quite significant hmm. I guess this program is great for people buying Applecare+. But then it's still a decent deal as this program is interest-free. If one pays upfront with a credit card then they will have to pay interest.
 
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JulesJam

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Sep 20, 2014
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So it's $139.23 more than paying upfront. This amount is about the same as the cost of Applecare+.
Yes exactly. The AiUP is the same price as buying an iPhone plus AC+ but you get an interest free loan to buy it.

The other advantage is that you get a hassle free upgrade after a year by simply turning in your old iPhone. If the old iPhone is in poor condition due to accidental damage, you simply pay the AC+ deductible when you trade it in.

There are 2 advantages to the AiUP over purchasing full retail and buying AC+:

1) interest free loan; and

2) hassle free trade in.
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the only phone I'm interested is the 7 Plus 128gb. Monthly payment for 24 months is $41.58.
To purchase the 128GB iP7+ it is $869 + sales tax = $921 at my tax rate

AC+ = $129 + sales tax = $137 at my tax rate

Total = $1058


AiUP = $41.58 x 24 = $998 + $52 sales tax on iPhone + $8 sales tax on AC+ = $1058

It is the exact same price either way. The difference with the AiUP is that you get interest free financing and a hassle free annual upgrade.
 
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techiebug

macrumors 6502a
Original poster
Oct 20, 2013
729
258
@junesjam: I didn't know Applecare+ also has tax. So basically they cost the same. Since I never buy Applecare+, the extra cost is a premium to me. This is still a great program. I might consider this next year. Thanks!!
 

Mlrollin91

macrumors G5
Nov 20, 2008
13,480
8,689
Ventura County
@junesjam: I didn't know Applecare+ also has tax. So basically they cost the same. Since I never buy Applecare+, the extra cost is a premium to me. This is still a great program. I might consider this next year. Thanks!!
Depends on the State. AppleCare+ is considered an 'insurance' plan in CA and is not subject to tax. Basically you don't pay sales tax on Services as its not an actual good.
 

JayLenochiniMac

macrumors G5
Nov 7, 2007
12,815
2,354
New Sanfrakota
Oh I see. So factoring in tax, total cost under Apple Upgrade Program is $1077.75 So it's $139.23 more than paying upfront. This amount is about the same as the cost of Applecare+. $139 is quite significant hmm. I guess this program is great for people buying Applecare+. But then it's still a decent deal as this program is interest-free. If one pays upfront with a credit card then they will have to pay interest.
Yes, but it's not like you're paying the full cost of AC+ each time you upgrade. After one year when it's time to upgrade, you'll have paid only half the cost of AC+ in the form of monthly payments.
 
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JulesJam

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Sep 20, 2014
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Depends on the State. AppleCare+ is considered an 'insurance' plan in CA and is not subject to tax. Basically you don't pay sales tax on Services as its not an actual good.
Exactly - in my state you do pay tax on it but it is a state by state thing.
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Yes, but it's not like you're paying the full cost of AC+ each time you upgrade. After one year when it's time to upgrade, you'll have paid only half the cost of AC+ in the form of monthly payments.
If you were to pay full retail for the phone + AC+ and sell your phone after 1 year, you could get 1/2 the AC+ refunded to you so it works out to be the same.

Scenario 1 - AiUP with upgrade after 1 year

128GB iP7+ = $41.58 x 12 = $499 + sales tax = $550


Scenario 2 - full retail selling after 1 year with refund of 1/2 AC+

$1058 - $68 refund of 1/2 AC+ = $990


$990 - $550 = $440


Thus the difference at 1 year is $440. If you can sell your 128GB iP7+ and net more than $440 for it, you come out ahead. But of course, you have to sell it and deal with the time, hassle and risk of that.

Right now a 1 year old Good-Mint condition Verizon 64GB iP6s+ (which is the equivalent mid-range storage size) is selling for about $475-$490 on swappa. After taxes/fees/shipping with insurance you would net $430-$445 or an average of about $440.

So it works out to be the same 1 year cost since Apple will refund you a prorated amount of the AC+. The difference is with the AiUP you get:

1) interest free financing; and

2) hassle free upgrades.


Wrt #2, if you sell on ebay or swappa, not only do you have to take pictures to list it, respond to offers, monitor the listing, pack it up and ship it, the buyer has 6 months to dispute the charge.

There is really no difference in price b/t the AiUP and buying full retail + AC+. The difference is simply in whether or not you need/want interest free financing and hassle free upgrades.
 
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JayLenochiniMac

macrumors G5
Nov 7, 2007
12,815
2,354
New Sanfrakota
If you were to pay full retail for the phone + AC+ and sell your phone after 1 year, you could get 1/2 the AC+ refunded to you so it works out to be the same.
This is assuming you haven't used up any of your deductibles. AC+ pro-rated refund is "based on the percentage of unexpired Plan Term from the Plan’s date of purchase, less a cancellation fee of twenty-five ($25) dollars or ten percent (10%) of the pro-rata amount, whichever is less, and the value of any service provided to you under the Plan."

You could blow through your deductibles in the IUP and it'll still be 50% after one year.
 
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hinesmj

macrumors 6502
Nov 19, 2015
296
204
New York
Keep in mind there's a hard hit on your credit when you apply for the program and every time you upgrade after that. That may make a difference if your credit is sensitive.
 

JulesJam

Suspended
Sep 20, 2014
2,537
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This is assuming you haven't used up any of your deductibles.
Correct.


AC+ pro-rated refund is "based on the percentage of unexpired Plan Term from the Plan’s date of purchase, less a cancellation fee of twenty-five ($25) dollars or ten percent (10%) of the pro-rata amount, whichever is less,
I have never been charged this btw. Apple can only charge that if it is allowed to by state law. In my state they are not allowed to charge it. Idk if they charge it in any states.

You could blow through your deductibles in the IUP and it'll still be 50% after one year.
Yes, that is a good point. Do you know under the AiUP do you get 2 accidental damage claims per year if you upgrade each year?
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Several existing IUP members reported receiving no hard hit when upgrading.
Correct. There is a hard pull only initially when you enter the program. As long as you stay in the program, there are no more hard pulls. If you don't make your payments on time they can deny the upgrade but they don't do any more hard pulls.
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Keep in mind there's a hard hit on your credit when you apply for the program and every time you upgrade after that. That may make a difference if your credit is sensitive.
No, just when you enter the program the first time.
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The difference with the AiUP is that you get interest free financing and a hassle free annual upgrade.
Another difference I just realized is that if you upgrade every year under the AiUP, you effectively get 2 accidental damage claims per year instead of 2 per 2 years.
 

Bigserver1

macrumors 6502
Sep 26, 2012
255
112
Several existing IUP members reported receiving no hard hit when upgrading.
I did two IUPs this year. One new one for my wife, and the continuation of mine. I was hit for the new one, but not for the second. I'm not sure if that's because the first application was done online on 9/9 and the second was done in store on 9/16, or if it was because mine was an existing loan. Typically a company will only pull once every 30 days, so logically it could be either.

If this is true though, and there aren't hard pulls in future years, I'll be very happy about that.
 

willmtaylor

macrumors G4
Oct 31, 2009
10,196
7,724
Here(-ish)
Keep in mind there's a hard hit on your credit when you apply for the program and every time you upgrade after that. That may make a difference if your credit is sensitive.
Several existing IUP members reported receiving no hard hit when upgrading.
Correct. There is a hard pull only initially when you enter the program. As long as you stay in the program, there are no more hard pulls. If you don't make your payments on time they can deny the upgrade but they don't do any more hard pulls.
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No, just when you enter the program the first time.
[doublepost=1476476438][/doublepost]
Another difference I just realized is that if you upgrade every year under the AiUP, you effectively get 2 accidental damage claims per year instead of 2 per 2 years.
Oh that's great then...I had read otherwise.
I did two IUPs this year. One new one for my wife, and the continuation of mine. I was hit for the new one, but not for the second. I'm not sure if that's because the first application was done online on 9/9 and the second was done in store on 9/16, or if it was because mine was an existing loan. Typically a company will only pull once every 30 days, so logically it could be either.

If this is true though, and there aren't hard pulls in future years, I'll be very happy about that.
@techiebug , There were instances of both "hard pulls and "soft pulls" this year for those who were renewing under the AUP. It's completely at the discretion of the bank.

To say that it's definitely one or the other is incorrect.