On the morning of Friday 22 September I will be one of the first to head to the Apple Store to collect the newly released iPhone 8. This is a rarity for me; rarely do I upgrade my smartphone, and I have a particular aversion to queueing so never purchase new devices on release day. My current iPhone 6 has served me well for nearly 3 years besides the screen on my original model cleanly separating itself from the phone in the first month of ownership, necessitating an Apple replacement. But it’s time for an upgrade, not least before the phone, which I purchased outright, devalues to the point of being entirely worthless.
For those not particularly interested in the goings on in the tech world (who can blame you), recent fluctuations in exchange rate (cheers Brexit) have provided an excuse for companies, Apple included, to raise their prices. This despite the fact that Apple appear unable, or perhaps unwilling to grasp the concept of an exchange rate; their UK and US prices being identical despite the difference in currency. A friend recently pointed out that it’s £3 cheaper to take a US holiday and buy a new iPhone while there than it is to buy said phone in the UK; thanks Apple. This aside, the 256GB iPhone 8 is up a full £50 on the previous model, priced now at £849. Add AppleCare+ at £129 and you’re close to dropping a grand on a smartphone; a ridiculous proposition for those of us who prefer to buy a phone outright rather than be extorted by a mobile network.
Apple do offer an option in the form of their iPhone upgrade program. This allows you to spread the cost of a new iPhone, and AppleCare+, over 20 months with 0% interest. It’s also a clever scheme to entice users to upgrade to a new model every year. After 11 months (mimicking the iPhone release cycle) you simply take the old phone to an Apple Store, exchange it for a new model and renew your contract. Or, if you’d rather not upgrade, you pay off the remainder over the remaining 9 months and the phone is yours.
A quick internet search reveals a lot of negativity surrounding this plan, but I fail to see why. One site claimed that users could lose over £300 a year through use of Apple’s upgrade program when compared to buying a device outright and selling it privately each year after upgrade. Yes, it is a clever scheme by Apple to sell its latest models. And yes, you’re forced to buy AppleCare+, an insurance package that pales in comparison to the competition. It covers you for 2 instances of accidental damage with an excess of £25 for screen repair or £79 for other repairs. It covers your phone’s battery and the accessories included in the box. You get a two-year warranty (useless if you plan to trade the phone in), and two years of of phone support; another worthless edition, given that the quality of Apple’s phone support appears to have declined massively in recent times.
£129 Is a hugely steep price to pay for a service that you’ll likely never need nor want to use. I’d see far more benefit in Apple offering to swap the AppleCare+ plan for a discounted set of AirPods, desired accessories amounting to the same £129 value, or better still a cheaper plan with yearly upgrades. You can opt for a 0% monthly payment plan without AppleCare+, but you’ll loose the benefit of the 11-month trade-in program.
So do the costs calculate? I preordered a £849 256GB iPhone8. It costs £45.45 per month on an upgrade plan, with an up-front cost of £69. That’s £978 in total, exactly as it would be if I’d bought the phone and the AppleCare+ subscription. After 11 months, I will have paid £568.95, at which point I will trade in the phone for the next model, renewing the plan. I’ll effectively be trading in my iPhone 8 for a value of £409.05, 48.18% of its retail value. Of course, this doesn’t take into account the AppleCare+ subscription. If we add that into the equation, and calculate our percentage based on the full payment of £978, I’m trading in for 41.83% of the original value.
That might sound low, and yes, it’s less than you’d typically get selling the phone outright. It’s difficult to guess what the iPhone 8 will sell for on the used market in a years time, but we can use the proceeding iPhone 7 as a guideline. A jet black, 256GB iPhone 7 sold on the 14th for £410, 51.25% of its original £799 value. A black model sold on the same day for £460, 57.50% of its original value. A second jet black model sold for £420.50 on the 13th (52.56%), and a third sold on the 11th for £440 (55%). Our highest resale value is 57.50%, 9.32% higher than our 48.18% trade-in value for our iPhone 8 above.
However, those sale prices were taken from eBay listings; a company known for high selling fees. eBay charges 10% of the sale and postage price as a final value fee, plus the 3% taken by PayPal. That adds up to a final sale of 44.5%, which is actually lower than our trade-in value if we discount AppleCare+, and only 2.67% higher than our 41.83% trade-in value if we do take AppleCare+ into account.
While the iPhone 7 in our example is £50 cheaper than the iPhone 8 succeeding it, Apple’s storage options are now limited to just 64GB an 256GB models, which will undoubtedly drive up the popularity of the 256GB model. While there are comparatively few 256GB iPhone 7s on the market at present, there will be more of the same capacity iPhone 8 vying for competition next year, which will only drive the price down further, making that 2.6% even more irrelevant.
So when the question arises as to whether Apple’s upgrade program is worthwhile, the answer is a resounding “Yes”. Sure, an option in which you could ditch the AppleCare+ plan but retain the yearly upgrades would be nice, but regardless of the forced AppleCare purchase the figures still look good. The advancements in smartphone technology are driving down the prices for used models every year. If you want to replace your smartphone on a yearly basis, whether to remain up-to-day or to prevent its value diminishing significantly, Apple’s upgrade program offers a hassle-free trade-in program that represents reasonable value and meaning that for many, there is little value in paying for a device in a lump sum and selling it privately after upgrade.
As a side note, I would like to see Apple offer the ability to join the upgrade program online or over the phone. Surely if a mobile provider or an insurance company can perform a credit check and take my direct debit details online, the same can be achieved by one of the world’ most valuable companies. Instead I must travel to a store and be queueing by 8AM. Thanks, Apple.
Disclaimers: Prices obtained from eBay sold listings on 15 September 2017. Figures correct to the best of my knowledge, but I am no mathematician. Sale price of iPhone 7 obtained from online review, As Apple have conveniently dropped the prices and don’t mention the original selling price anywhere on their website.