Yearly off-contract upgrades vs every 2 years - $

[skiltrip]

I think quite a few of us do the "buy it outright" thing, and then sell when we're ready to upgrade and do it all over again. I've done this for a few years, but before the iPhone 6, I've been on Android, and I've only had one "top-tier" Android phone (the GS3).

I'm wondering, financially speaking, what does one typical lose/spend doing this every year vs every two years. Upgrading every 2 years, you obviously are spending less, but you're also losing value on your current phone.

Common sense / logic says you spend less money doing this every other year, but I'm wondering what the typical difference actually is. My guess is that you lose more value in year 1 than you do in year 2, but maybe the depreciation is more linear than I think it is.

Take this years 64GB iPhone 6 for example. It costs roughly $800 after tax.

In one years time, the cost will typically drop by X. In two years time, it'll drop by X+Y.

We'll assume the price of a new 64GB iPhone will be the same for years 1 and 2. Anyone have any educated suggestions for X and Y based on past experience?

 

[cousintim]

After 2 years, a used iPhone 64GB will fetch around $300-$325.

My guess is that you lose more value in year 1 than you do in year 2, but maybe the depreciation is more linear than I think it is.

It would depreciate more in second year because of more phones available for resale.

 

[macher]

After 2 years, a used iPhone 64GB will fetch around $300-$325.



It would depreciate more in second year because of more phones available for resale.

Yep I agree around $325'ish. We are still on a 4 line grandfathered unlimited data plans and still get 2 year upgrades at subsidized pricing. What we have been doing is selling our iPhones after we upgrade and it almost covers the cost of the upgrade.

 

[BeeGood]

My experience is that the year over year drop is roughly the same. X = Y.

On eBay, the annual drop seems to be roughly $200.

 

[GoingDark]

iPhones tend to hold their residual value much better than any other phone I've ever seen, and for much longer. At around the 1-year mark, the previous-gen iPhone and the previous-gen Galaxy seem to be roughly equivalent in value, but by the 2-year mark the value of the Galaxy will drop like a stone while the iPhone will depreciate at a more stable rate.

 

[Kendo]

I think quite a few of us do the "buy it outright" thing, and then sell when we're ready to upgrade and do it all over again. I've done this for a few years, but before the iPhone 6, I've been on Android, and I've only had one "top-tier" Android phone (the GS3).

I'm wondering, financially speaking, what does one typical lose/spend doing this every year vs every two years. Upgrading every 2 years, you obviously are spending less, but you're also losing value on your current phone.

Common sense / logic says you spend less money doing this every other year, but I'm wondering what the typical difference actually is. My guess is that you lose more value in year 1 than you do in year 2, but maybe the depreciation is more linear than I think it is.

Take this years 64GB iPhone 6 for example. It costs roughly $800 after tax.

In one years time, the cost will typically drop by X. In two years time, it'll drop by X+Y.

We'll assume the price of a new 64GB iPhone will be the same for years 1 and 2. Anyone have any educated suggestions for X and Y based on past experience?

Coming from someone that bought an iPhone 5 after the 5S was released:

iPhone 5 64GB at release was $850.

One year later after the 5S released, I purchased a used iPhone 5 64GB off Craigslist for $400.

When I look up the same model now, it is selling for around $275 to $300.

So you are basically losing the most after year 1, and year 2 isn't so bad ($100 jump vs $450 jump). Value wise, you might as well keep it for two years.

 

[GreatDrok]

Why replace your phone every two years? I just switched to a 6 plus from a 4 I bought outright back in 2011 and I plan to keep it going for as long as possible too. There's nothing wrong with the 4 as it still works fine and if I hadn't wanted the features of the 6 plus I could have kept it for at least another year or two even though iOS 7 is the last update it has. There's even a 3GS in use by a colleague here.

 

[rui no onna]

Why replace your phone every two years? I just switched to a 6 plus from a 4 I bought outright back in 2011 and I plan to keep it going for as long as possible too. There's nothing wrong with the 4 as it still works fine and if I hadn't wanted the features of the 6 plus I could have kept it for at least another year or two even though iOS 7 is the last update it has. There's even a 3GS in use by a colleague here.

Before T-Mobile pretty much forced other major US carriers to decouple device cost from plan cost, you were giving carriers an extra $450 for every 2 years that you don't upgrade.

Now in places where you buy phones full price, it makes sense to keep devices for as long as they meet your needs and performance requirements.

 

[Kendo]

Before T-Mobile pretty much forced other major US carriers to decouple device cost from plan cost, you were giving carriers an extra $450 for every 2 years that you don't upgrade.

Now in places where you buy phones full price, it makes sense to keep devices for as long as they meet your needs and performance requirements.

That is true but for some of us on older plans, the subsidized plans we hold now with the 2 year contract are better than the current decoupled plans right now.

For example, I get 450 mins a month, unlimited text, and unlimited data for $70 a month on a two year contract. Not only do I get more data at a cheaper price than most plans, I also get the benefit of paying $200 for an iPhone.

Your example makes sense only if you are getting a phone plan for the first time today.

 

[rui no onna]

That is true but for some of us on older plans, the subsidized plans we hold now with the 2 year contract are better than the current decoupled plans right now.

For example, I get 450 mins a month, unlimited text, and unlimited data for $70 a month on a two year contract. Not only do I get more data at a cheaper price than most plans, I also get the benefit of paying $200 for an iPhone.

Your example makes sense only if you are getting a phone plan for the first time today.

It's a case by case basis. We were on a 4-line family plan so for us, the new plans are definitely less expensive. Before, we would have paid $240 ($60/line) per month for 700 minutes, unlimited text and "unlimited" data. Now, that's down to $160 per month ($40/line, 10/20GB data with tethering). Granted, 2-year costs for both are pretty similar assuming all lines get upgraded.

2-year:
Plan: $240*24 = $5,760
iPhone 32/64GB: $300*4 = $1,200
Total: $6,960

Next 12:
Plan: $160*24 = $3,840
iPhone 32/64GB: $37.50*4*20 = $3,000
Total: $6,840

However, now I'm not forced to upgrade lines just so I don't lose the subsidy. If I decide I only want to upgrade 2 phones, then that's $1,000+ in savings.

 

[Givmeabrek]

Talking off contract as the OP asked, it looks like it comes out the same. If the phone depreciates $200 a year for the first two years (a good guess) then after two years it will cost $400 total either way. Might as well upgrade every year!

 

[mattopotamus]

I upgrade every year, but I also add applecare+. After I sell the device (I do not mention it has AC+ when selling). I call apple and they refund me the portion of AC+ I have not used ~$50.

Taking that into consideration, I usually end up spending $300 to upgrade every single year (32gb/64gb iphone 6 now that they changed storage)

side note: If I was to get on Jump w/ tmobile (my current carrier) it would cost me more since I would have to be on jump $9.99 a month and also pay aprox. $29 a month until the new phone was released.

 

[rui no onna]

Common sense / logic says you spend less money doing this every other year, but I'm wondering what the typical difference actually is. My guess is that you lose more value in year 1 than you do in year 2, but maybe the depreciation is more linear than I think it is.

Take this years 64GB iPhone 6 for example. It costs roughly $800 after tax.

In one years time, the cost will typically drop by X. In two years time, it'll drop by X+Y.

We'll assume the price of a new 64GB iPhone will be the same for years 1 and 2. Anyone have any educated suggestions for X and Y based on past experience?

Personal experience (from buying used iPhones and iPads), I find Year 1 depreciation to be the highest for top capacity models. If you only have the 16GB model, then depreciation tends to be more linear.

Just a sample scenario based on my observations:

Yearly
Buy iPhone 5 64GB: $850
Sell iPhone 5 64GB: -$450
Buy iPhone 5s 64GB: $850
Sell iPhone 5s 64GB: -$450
Buy iPhone 6+ 64GB: $850
Net Expenses: $1,650

Every 2 Years
Buy iPhone 5 64GB: $850
Sell iPhone 5 64GB: -$300
Buy iPhone 6+ 64GB: $850
Net Expenses: $1,400

The above assumes decoupled plan and device costs so no subsidies.

 

[mattopotamus]

Personal experience (from buying used iPhones and iPads), I find Year 1 depreciation to be the highest for top capacity models. If you only have the 16GB model, then depreciation tends to be more linear.

Just a sample scenario based on my observations:

Yearly
Buy iPhone 5 64GB: $850
Sell iPhone 5 64GB: -$450
Buy iPhone 5s 64GB: $850
Sell iPhone 5s 64GB: -$450
Buy iPhone 6+ 64GB: $850
Net Expenses: $1,650

Every 2 Years
Buy iPhone 5 64GB: $850
Sell iPhone 5 64GB: -$300
Buy iPhone 6+ 64GB: $850
Net Expenses: $1,400

The above assumes decoupled plan and device costs so no subsidies.

Ill be honest, you are getting robbed if you sell a 64gb 5s for $450 after 1 year. $550 is what I get and that is me listing at that price to sell it right away.

 

[rui no onna]

Ill be honest, you are getting robbed if you sell a 64gb 5s for $450 after 1 year. $550 is what I get and that is me listing at that price to sell it right away.

Didn't sell it. That's the price I paid for a used, mint condition Verizon 5s 64GB at Swappa.

We never sell the 1-year old phones since those get handed down to my mom and dad.

Our upgrade cycle back when we were all on 2-year contracts have been:
Me & Bro: latest model
Mom & Dad: 1-year old model
Sell/Trade-In (sometimes): 2-year old model

 

[Kendo]

Personal experience (from buying used iPhones and iPads), I find Year 1 depreciation to be the highest for top capacity models. If you only have the 16GB model, then depreciation tends to be more linear.

Just a sample scenario based on my observations:

Yearly
Buy iPhone 5 64GB: $850
Sell iPhone 5 64GB: -$450
Buy iPhone 5s 64GB: $850
Sell iPhone 5s 64GB: -$450
Buy iPhone 6+ 64GB: $850
Net Expenses: $1,650

The above assumes decoupled plan and device costs so no subsidies.

Best way to do this is to buy a one year old model.

64GB iPhone 5S releases at $850.

Buy used iPhone 5 64GB at $400.
Sell iPhone 5 64GB for $300.
Buy iPhone 5S 64GB at $400.
Sell iPhone 5S 64GB at $300.
Buy iPhone 6 64GB at $400.
Next expense at $600 just buy having a one year old model.

Of course no one knows if they truly will drop to $400 in the future but in my experience, the 64GB 5 dropped to $400 after the 5S released, and the 64GB 5S dropped to $400 (actually dropped further because the 6 was a design change) after the 6 released.

 

[617aircav]

Best way to do this is to buy a one year old model.

64GB iPhone 5S releases at $850.

Buy used iPhone 5 64GB at $400.
Sell iPhone 5 64GB for $300.
Buy iPhone 5S 64GB at $400.
Sell iPhone 5S 64GB at $300.
Buy iPhone 6 64GB at $400.
Next expense at $600 just buy having a one year old model.

Of course no one knows if they truly will drop to $400 in the future but in my experience, the 64GB 5 dropped to $400 after the 5S released, and the 64GB 5S dropped to $400 (actually dropped further because the 6 was a design change) after the 6 released.

Honestly I believe someone willing to buy a year old model is not concerned about yearly upgrades. Such a person would just buy the latest device and keep it for 2 or 3 years before upgrading. And a person who upgrades yearly want the latest and greatest every year.

 

[technosix]

iPhones tend to hold their residual value much better than any other phone I've ever seen, and for much longer.

That's a fact that may be a thing of the past. I'm seeing lower resale values early in the cycle this year. By now iPhone's are everywhere, also they're more expensive. I buy a new one every year, this year I have a feeling that resale will be proportionately less.

I'm prepared to suffer much lower resale this time around.

Plus this 64GB iPhone 6 Plus I have must go. I'm very eager to unload this buggy phone and buy the upcoming model. Every second gen iPhone I've had is significantly better than the original gen model.

I will willingly bail out of this one.

 

[lordofthereef]

That's a fact that may be a thing of the past. I'm seeing lower resale values early in the cycle this year. By now iPhone's are everywhere, also they're more expensive. I buy a new one every year, this year I have a feeling that resale will be proportionately less.

I'm prepared to suffer much lower resale this time around.

Plus this 64GB iPhone 6 Plus I have must go. I'm very eager to unload this buggy phone and buy the upcoming model. Every second gen iPhone I've had is significantly better than the original gen model.

I will willingly bail out of this one.

Couldn't agree more.

 

[macher]

That is true but for some of us on older plans, the subsidized plans we hold now with the 2 year contract are better than the current decoupled plans right now.

For example, I get 450 mins a month, unlimited text, and unlimited data for $70 a month on a two year contract. Not only do I get more data at a cheaper price than most plans, I also get the benefit of paying $200 for an iPhone.

Your example makes sense only if you are getting a phone plan for the first time today.

Yep, we have a 4 line grandfathered each with unlimited family plan with 2 year contract upgrades. Upgraded to an iPhone 6/64GB and the cost was $299. I would never go on Next. The biggest benefit even more than unlimited data is the subsidized pricing.