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Why is Applecare so much more expensive for iPhones?
- Thread starter AppleStart2013
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Typically they live a rougher life and need more repairs. Thus the warranty is more expensive.
Bottom line: Insurance.
Applecare is underwritten by insurance companies - they evaluate their profit vs risk. an iPhone is more likely to be damaged because it's always on you. Bigger risk means more claims, so everybody's premiums go up to pay for it.
Same philosophy as to why a faster car will push up your car insurance even though you're the same driver going to the same places.
Remember that AppleCare is insurance. The claim rate is higher on smartphones.
I'm sure Tim Cook gets quarterly reports from actuarians about AppleCare revenue versus reimbursed claims. Apple will price AppleCare so it will not lose money.
We already know that Apple generates fat gross margins for its shareholders (I am an indirect shareholder). Apple isn't offering AppleCare "at cost" or as a loss leader. It undoubtedly ends up in the Services revenue segment of their pie chart, the fastest growing segment.
I'm sure Tim Cook gets quarterly reports from actuarians about AppleCare revenue versus reimbursed claims. Apple will price AppleCare so it will not lose money.
We already know that Apple generates fat gross margins for its shareholders (I am an indirect shareholder). Apple isn't offering AppleCare "at cost" or as a loss leader. It undoubtedly ends up in the Services revenue segment of their pie chart, the fastest growing segment.
To be fair, I never thought I'd use AppleCare. I'm careful with my phones. Bought it on my first iPhone. Turned out my NFC chip was proven defective over a year later. Bonus: New phone with a new battery.
iPhone, Watch and laptops have a much higher chance of being damaged, by an order of magnitude. Desktop Macs, on the other hand, typically are either a lemon right out of the box, or work perfectly their entire lifespan - at least so much as they don't typically need PHYSICAL repairs.
In the early years, AppleCare did not cover accidental damage and was only $69. Apple stated on financial earnings calls that the goal was to mostly break even. We were told as Apple technicians that we could replace an iPhone THREE times before it put Apple into red ink.
Over time the phones got more expensive to make/repair, especially the OLED screens, and Apple added accidental coverage, while lowering the deductible. They also run the division for a profit now, instead of break even.
AppleCare revenue covers all the phone support people, but also the Genius Bar/technician aspect of the retail stores, from an accounting perspective.
Edit: One more thing, AppleCare revenue belongs within the "services" division for accounting, which is the fastest growing part of the company. It needs to keep growing.
Over time the phones got more expensive to make/repair, especially the OLED screens, and Apple added accidental coverage, while lowering the deductible. They also run the division for a profit now, instead of break even.
AppleCare revenue covers all the phone support people, but also the Genius Bar/technician aspect of the retail stores, from an accounting perspective.
Edit: One more thing, AppleCare revenue belongs within the "services" division for accounting, which is the fastest growing part of the company. It needs to keep growing.
How could Apple predict that on a scale i wonder ... You can only based that only by the number of repair have come in before you can come to that conclusion,
i.e you can't know that in advance. The price would justify the repair costs.. but that would be about it.