Is the Apple iPhone Upgrade Programme Good Value?

http://www.buzzpods.com/wp-content/uploads/2016/09/iPhone-Upgrade-Program.pnghttp://www.buzzpods.com/wp-content/uploads/2016/09/iPhone-Upgrade-Program.pngIs the Apple iPhone Upgrade Programme Good Value?

Alongside the launch of the Apple iPhone 7, Apple have brought their iPhone Upgrade Programme to the UK. This new upgrade programme has the potential to disrupt the traditional mobile phone commercial model and offer better value to consumers.

Traditionally, those that have the cash would tend to buy a SIM free phone from Apple up front and then use the best value SIM only plan they could find. Many would then sell on their iPhone the following year and buy the latest and greatest model.

The majority of people though would buy their iPhones on a 24 month contract bundled with a calling plan and therefore spread the cost over 2 years but would generally end up paying a little more for the privilege.

With the new Apple iPhone Upgrade Programme (or the interest free payments plan), everyone can afford to buy a SIM free phone from Apple, spread the cost over 20 months and then opt for a SIM only plan.

How does the new iPhone Upgrade Programme Work?

Apple iPhone Upgrade Programme Explained
Apple have two schemes alongside their new iPhone 7, they are the Apple iPhone Upgrade Programme and their Interest Free Plan.

iPhone Upgrade Programme
You purchase your choice of iPhone and the two year Applecare+ cover (£119) at standard RRP BUT you pay £49 up front and then spread the remaining cost over 20 months with no interest added.

Example: a 128Gb iPhone 7 costs £699 and the Applecare+ costs £119 = total cost £818.

With the Upgrade Programme, you pay £49 up front and then 20 equal monthly payments of £38.45.

If you didn’t want to keep the phone for the whole period, after 11 months, you can swap your iPhone for a new one, so essentially you will have paid £471.95 at that point.

Note: although payments are over 11 months, this is actually 12 months (1 year) as Apple take a £49 up front payment on the day of purchase and your monthly payments then start from the following month


iPhone Payments Plan
Apple also have another alternative that doesn’t require you to purchase the Applecare+ cover.

Instead this is a straight forward interest free plan but with no option to trade-in/swap your phone.

If you do want to swap for a newer iPhone the following year, you can just pay off the remaining the cost of the phone, sell it and then buy a new one.

Example: a 128Gb iPhone 7 costs £699.
With the iPhone Payments plan, you pay £49 up front and then 20 equal monthly payments of £32.50.

If you didn’t want to keep the phone for the whole period, after 11 months (or at any point you decide), you will have paid £406.50 at that point.

You can then pay off the remaining lump sum of £292.50, sell your iPhone and buy a new one.

We estimate that after one year, the approximate used value of a 128Gb iPhone is £420 or approx. £370 if traded in to somewhere like CEX or Music Magpie.

The cost of the iPhone Upgrade Program varies based on the iPhone you choose to buy because the handset costs are different. Here are some examples:

iPhone Upgrade Program Costs

This means they are potentially getting the best value i.e. the phone at standard RRP plus the best value SIM contract AND they have the option to trade-in/pay off the phone after a year and upgrade sooner.

This will drive more people to upgrade annually instead of every two years and therefore maintaining the momentum of annual iPhone sales.

How does it compare?

In our iPhone 7 Contract analysis of the best iPhone 7 contracts at launch, you can see that in the majority of cases, you are paying approx. £25-£30 over the RRP of the phone, for SIM contracts that typically cost around £15-£20 if they were SIM free.

Comparison of iPhone Upgrade Programme & Mobile Network Contract
In order to compare the monthly cost of purchasing a new iPhone 7 from Apple on the iPhone Upgrade Programme or through a mobile network, we have used a 128Gb iPhone 7 and a call plan with unlimited calls and texts.

Provider Data Up front Cost Monthly Cost Total Cost over 24 months
EE 5Gb
£49.99
£55.99
£1,393.75
Apple & EE SIM Only 8Gb
£49.00
£58.44
£38.45(Apple)+£19.99(EE) for 20 months
and then £19.99(EE)
£1,297.76

As you can see the total cost over 24 months is £95.99 less with the iPhone Upgrade Programme. With the programme, you have the option to upgrade your iPhone after 12 months and you are not tied into your mobile contract and have the flexibility to shop around for the best deal.

In addition, you also have the 2 year Applecare+ cover for any breakages or faults.

Comparison of iPhone Interest Free Plan & Mobile Network Contract
In order to compare the monthly cost of purchasing a new iPhone 7 from Apple on the iPhone Interest Free Plan or through a mobile network, we have used a 128Gb iPhone 7 and a call plan with unlimited calls and texts.

Provider Data Up front Cost Monthly Cost Total Cost over 24 months
EE 5Gb
£49.99
£55.99
£1,393.75
Apple & EE SIM Only 8Gb
£49.00
£52.49
£32.50(Apple)+£19.99(EE) for 20 months
and then £19.99(EE)
£1,178.76

As you can see the total cost over 24 months is £214.99 less with the iPhone Interest Free Payments Plan. With this plan, you have the option to upgrade your iPhone at any time by paying the remaining balance off and you are not tied into your mobile contract and have the flexibility to shop around for the best deal.

Word of Caution

The iPhone Upgrade Programme appears to be an interesting and potentially hassle free way of getting the latest and greatest iPhone every year. If you want the latest iPhone on launch day, assuming you don’t get caught up with all the usual pre-order/launch delays, you could be disappointed.

The iPhone Upgrade Programme launched in the US last year with the iPhone 6S. For those on the Programme now wanting to upgrade to the iPhone 7, a long wait faces them.

Apple appear to be limiting the stock they are making available for those already on the Upgrade Programme and prioritising stock for their new customers.

Those that are on the Programme are at the back of the queue. They will still get their shiny new iPhone, but only once there is sufficient stock.

Summary

The Apple iPhone upgrade programme opens up the option for many people of accessing cheaper SIM Only contracts with shorter contract terms. They can buy their iPhone direct from Apple (and spreading the cost with no additional interest charge) and then shopping around for the best 30 day/12 month SIM only plan, taking sales of Apple iPhone handsets away from the networks.

It will be interesting to see the adoption of the new iPhone Upgrade Programme and how it changes the traditional commercial model over time, whilst boosting annual iPhone sales.