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Apple’s begun taking preorders for the new iPhone 6S and 6S Plus, and by all accounts, it looks like another record launch. A lot has happened in the wireless industry since the last time Apple released a new iPhone: All four national cellular carriers – AT&T, Verizon, T-Mobile and Sprint – have moved away from the traditional two-year contract, that familiar arrangement that tied you to your carrier but let you buy a basic iPhone at a subsidized price of $199.
This shift away from device subsidies means millions of Americans will now for the first time be expected to cover the full price of their phones – $649 or more, in the case of the iPhone. When it comes to paying that cost, consumers also face a wider array of options; most carriers now encourage you to spread your payments out over many months as part of a device payment plan.
The range of choices is more likely to confuse than to clarify. You can buy. You can lease. Some offer promotional pricing; others don’t. Do you want insurance with that? It’s extra. You can pay in installments. But how many? Twelve? Eighteen? Twenty-four? Thirty? For a consumer used to paying just $200 for a phone and then a monthly service fee for voice, texts and data, obtaining a smartphone just got a lot more complicated.
And into this mix comes Apple, which just announced a new plan of its own that lets you pay for an iPhone over 24 months and upgrade every 12 months. Why is Apple offering an installment plan now? Well, with contracts going away and the cost of iPhones seemingly going “up” in the eyes of many consumers, Apple could lose customers who are turned off by the steep prices. Apple needs to show that its premium hardware is still affordable for most people, and like the carriers, it bets that monthly payments will do the trick.
Even though it’s aimed at simplifying everything, the addition of a new choice from Apple threatens to add complexity to an already confusing jumble of payment plans. So we’re going to break it down for you.
For reasons we’ll get into below, we think Apple’s new iPhone upgrade plan will be right for many people, and it could even reshape the face of the cellular industry. But it’s not for everyone; price-sensitive consumers might want to prioritize low monthly payments. People who are already midway through their device lifecycle (and thus aren’t eligible for an upgrade right now) might want an option that lets them upgrade sooner. The privacy-conscious among us, or those who want to sell their phones on the used market, may want to avoid plans that require you to trade-in your device. And some people just want the most straightforward plan, one that looks the most like what they have now.
Choices give you flexibility. But they also add complexity, which is why we’ve tried to narrow down the options based on a set of common consumer archetypes we think will describe many Americans. iPhone shoppers should ask themselves what they value most. Is it price? Is it the ability to upgrade the device whenever you want? Do you want to own the device? Or do you just like the way things were?
