Apple's New iPhone Upgrade Program: Is it Worth It?

On paper, the new iPhone Upgrade Program sounds fantastic. You pay $32.41 per month for a fully unlocked iPhone, with the option to trade it in at the 12-month mark for the next iPhone. You can pick any carrier you want, you're not locked into a wireless contract, and you get to own the latest iPhone every year—no more salivating over the iPhone 7 while you're stuck with a cruddy, worthless iPhone 6S.

But is this actually such a sweet deal? At SpecOut, we charted Apple's new plan against the equivalent options from AT&T and Verizon. We also threw in the cumulative cost of paying full price for an unlocked iPhone on day one.

Before we jump to the numbers, let's establish a few ground rules, because the math can get complicated quickly:

1. All calculations below assume you will upgrade once per year (i.e. you'll buy the iPhone 7 next year), for a total of two phones over 24 months.
2. We're focusing on a base model iPhone 6S (16 GB). Rates will be higher for phones with more storage (ex: 64 GB) and for the iPhone 6S Plus, but the overall conclusions should be the same.
3. We're not factoring in any wireless service costs whatsoever. This is strictly about the cost of the phone.
4. Using the popular trade-in service Gazelle, we estimate you'll pocket about $320 for a year-old, base-model iPhone, on average, if you keep your phone in reasonably good condition. This will apply to two of the plans in our charts.

The Plans

We've already covered the iPhone Upgrade Program. It's as simple as paying one monthly fee, and getting a new phone once per year.

The classic "unlocked" option is the next simplest. Here, you pay the full cost of the phone up front ($649), then get about half of that back when you sell the old phone each year.

Verizon's new policy—attractively titled the "Verizon device payment program"—has gotten simpler as well. There is no more trading in after X number of payments. You're simply on the hook for the full cost of the phone, and can pay it off as fast as you'd like. For our purposes, we'll assume you split the cost up into 12 equal segments. Keep in mind that you can resell your phone under this plan as well.

AT&T Next is a little different. Here, we'll be focusing on the AT&T Next 12 plan, which allows you to trade in your old phone and get a new one after just 12 payments. In this case, you're not allowed to keep or resell your old phone, just like with the iPhone Upgrade Program.

On to the Numbers

The below charts show the cumulative cost of each plan over the course of two years. The Verizon and classic unlocked options factor in the approximate resale value of your phone at the 12- and 24-month marks.

Here, AT&T Next and the unlocked option virtually tie as the best deals after 24 months, with Verizon only $5 behind. The difference here is marginal enough to come down to which company's service you prefer.

Meanwhile, the iPhone Upgrade Program quietly becomes the priciest option of the lot at 24 months—well over $100 more than the other plans. But the iPhone Upgrade Program comes with AppleCare+ baked in, unlike the other three options. AppleCare+ provides two years of premium support, including two relatively cheap ($79) fixes for accidental damage, like a cracked screen.

Suppose, then, that you factored in the cost of AppleCare+ ($99) into the other three plans. Keep in mind that you'd need to buy it twice—once for each phone (i.e. the iPhone 6S this year, the iPhone 7 next year).

Here, the iPhone Upgrade Program makes a lot more sense. Instead of losing over $100, you're saving about $80 after two years, even after you factor in the resale value in other plans.

The Bottom Line: Recommendations

All of these assume you want to upgrade your iPhone once per year.

• If you love AppleCare+…definitely get the iPhone Upgrade Program.
• If you're good at getting great deals on year-old products (think: eBay)…get a classic unlocked phone, or go with Verizon.
• If you want the convenience of a trade-in style program (i.e. don't have to worry about selling your old phone), but don't care for AppleCare+…go with AT&T.

The Fine Print

The AppleCare+ Debate

AppleCare+ might sound attractive, but if you're upgrading once every year, it's no longer a slam-dunk of a deal. Consider that the less time you have a given phone in your possession, the less likely you are to accidentally damage it. And even if you do crack your screen in month 11, who cares? You're upgrading in just 30 days anyway.

It's for this reason that many customers may choose to forgo the iPhone Upgrade Program and grab one of the cheaper, non-AppleCare+ options. Add in the fact that you can get a cracked screen repaired at a mall kiosk or third-party repair shop for around $150, and AppleCare+ loses a bit more luster.

Wireless Service

The benefit for both the iPhone Upgrade Program and the classic unlocked phone is that you can choose your carriers, pay month-to-month, and cancel service anytime. This is particularly nice if you want to escape the clutches of America's two biggest carriers.

Then again, many customers begrudgingly march back to AT&T or Verizon after trying some of the smaller players like Sprint and T-Mobile. It's fun to side with the little guy, but the big carriers tend to have the most robust networks overall.

Liabilities

The best part about the classic unlocked deal is that you can cancel everything—from wireless service to phone costs—anytime whatsoever. Compare that to AT&T or Apple, where you're technically on the hook for 20 or 24 total payments, respectively, if you decide not to upgrade. (Verizon requires customers to pay off the full phone as well, but because they make customers do this every time before upgrading, these customers are less likely to be taken by surprise.)

Constantly Changing Rates

AT&T and Verizon love to change their rates, sometimes publicly, sometimes quietly. It's one reason why any "explaining the math" post can become outdated in a matter of weeks or months. As always, double check the latest published rate from each carrier to make sure something hasn't changed—or at least changed significantly.

Apple is usually a bit better about offering predictable pricing, but the company isn't immune either. For example, we don't know for certain whether AppleCare+ will remain at the same $99 price point, nor whether the AppleCare+ services will change anytime soon.

Compare Every Wireless Plan Side by Side on SpecOut