On this eve of the latest iPhone release date, I heard a couple of radio hosts discussing Apple’s new lease option to get a new iPhone every year. Granted, they were discussing this from Apple’s perspective and how much money it will bring into Apple’s already over-sized bank accounts. But, is the lease program right for the average consumer?
For the most part, ri4d.com says NO! Leasing rarely makes sense for the average consumer and the iPhone is no different.
For the most part, ri4d.com says NO! Leasing rarely makes sense for the average consumer and the iPhone is no different.
First, many carriers are moving away from subsidized pricing (ie, iPhone is $200 with 2 year contract) in favor of no interest financing or lease programs similar to Apple’s. Yes, you may not have a contract, but you’re paying full price for the phone.
So let’s start number crunching with last year’s iPhone 6. We’ll use the 64gb model in our examples. At the release of the iPhone 6 last year, you could buy a 64gb model outright for $749. You own it free and clear with no contract and no monthly payments. This year, the 64gb iPhone 6S is also $749 if you buy it outright and again, you won’t have a contract or monthly payments.
Under Apple’s plan, you would spend $37.45 each month to lease their phone (64gb 6S). Remember, leasing means it’s NOT YOUR PHONE. The phone belongs to Apple. For $37.45/mo x 12 months, you will have paid Apple $449.40. Doesn’t sound too bad, right? After all, it would have been $749 if you had just bought it.
So did you save money? NO! You spent more than you would have if you had just bought the phone upfront!
-$449.40 (cost of lease) = net loss of $449.40 and the phone doesn’t belong to you.
-$749 (cost to buy) +$450 resale value = net loss of -$299 because you owned the phone and sold it when you upgraded to the newer model.
Of course there are some assumptions to the previous statement, number one being that you sell the old phone in good condition.
Yes, Apple does include AppleCare in their lease program, which gets you two accidental damage (no lost/stolen coverage included) repair or replacements at $99 each, but there are more affordable options available. SquareTrade has a plan for $4-$8/mo and a $75 deductible for iPhones. iCracked’s Advantage plan is $4.50-$7/mo with a $25 deductible. SquareTrade and iCracked also do not cover lost or stolen devices, which is part of the reason the deductible’s are so low.
If you have insurance through a cellular provider, you may get a refurbished replacement phone, but cell phone insurance is expensive (13/mo x 12 mo is $156 + $200 deductible and you’re out $356). For less than $356, you can get a nice used phone to use as a replacement until you're ready to buy the newest model on the next release date. For this reason, cellphone insurance (usually through Asurion) is overpriced and not worth the money. Virtually all repairs (aside from the screen on a newly released phone) are LESS than the deductible and you can find decent replacement phones for less than the deductible + a year's worth of monthly payments.
For more on what your phone and phone plan are costing you and how that compares to other service providers, you can check out this calculator hosted by WalletHub https://wallethub.com/cell-phone-calculator/
The following was added in after the original posting:
In regards to leasing your phone, whether through Apple or a cellular service provider, it is important to keep in mind that it's NOT your phone and should you lose it, you are responsible for the cost of replacing it. IMO, this little fact should rank #1 as to why you shouldn't lease it and #2 should be that the lease costs more than buying it, then reselling it the following year when you buy the newest model. If you're accident prone or lost device prone, leasing a phone will end up costing you a LOT more than if you had just bought it upfront.
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