Handy flowchart outlines your options for picking up a shiny new iPhone [Poll]

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In the old days, buying and paying for a new iPhone was simple: you typically paid $1-200 up-front, then the rest of the purchase cost was absorbed by carriers into the monthly rates they charged for their contracts. There was no easy way to tell how much of that monthly payment was for calls/texts/data and how much was paying off the balance of the cost of the phone.

Today, things are very different, with carriers being much more transparent about what you pay for your contract – if you choose to have one – and how much you pay for the iPhone itself. The WSJ has put together a simple infographic outlining the main options open to you … 

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Let’s start with the flowchart then talk about each option. Note that costs are based on a 16GB iPhone – almost certainly not what you’ll want – and assumes pricing will be the same as last year.

flowchart

So, there are three main routes you can take. First, renewing your existing contract for two years. This option looks pretty much like the old model, where you pay $200 up-front and continue to pay the same amount each month as you do now. You’ll be locked in for two years, and won’t be able to upgrade iPhone until then.

Second, buy your new iPhone – either outright for cash, or on a monthly installment plan which runs separately from your service plan. At the end of the two-year plan, the phone is yours to do with as you wish.

Third, rent your iPhone. When you want to upgrade, hand it back and you can begin a new rental contract for the new one.

In my home country, the UK, we’ve had the option of separate purchase and service plans for many years. Having done the sums, I always go for option 2: buying my iPhone direct from Apple for cash – unlocked and contract-free. This means handing over the full purchase price upfront, which is a lot of money in one hit, but I then sell my old phone on eBay. If you don’t want the hassle of eBaying it, there are a whole bunch of trade-in options – including direct to Apple.

I generally manage to keep my iDevices in mint condition, and I keep the box and unused accessories. I also take lots of good-quality photos for my eBay ad. Put all this together, and I typically get back two-thirds of the purchase price if selling after one year, or around 40% after two years. All-in, then, my cost of ownership of an iPhone is no more than a third of the purchase cost per year. Because that gives me the freedom to shop around for the best service plan, and am able to switch whenever I like, my total cost is always significantly less than it would be under a contract deal.

If you’ve read our roundup on what to expect today and are planning to pick up an iPhone 6S, which option will you go for? Take our poll and let us know your reasons in the comments.

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Comments

  1. I don’t see a point of renting a phone. I doesn’t make sense. How ofter can you change it for a new one when renting? Each year?

    • Stetson - 7 years ago

      The idea is that every year you turn it back in and they give you the latest one. Basically you’re just paying a bit more than the depreciation on the phone. It probably works out to about the same money as if you bought and sold it every year, just with less hassle since the carrier takes care of that for you.

  2. brabauer - 7 years ago

    Verizon doesnt do 2 year contract any more. Atleast I thought i read a month ago they dropped them… Don’t see the 2 year pricing on their website anymore

    • cdm283813 - 7 years ago

      Will be interesting how Apple skates around pricing with all these carrier financing plans and term lengths.
      People should know that there buying a $650 to $950 phone and not the subsidized price of $200 to $500.

    • Skip Clarke - 7 years ago

      AT&T doesn’t either. I tried to renew contract with iPhone 6. There was no such “$200 phone with two year option”. Doing that “removed the discount” (which I didn’t know I had) for completing my contract. So, I would have to pay $200 (or more, depending on model) for the phone, and still have a higher bill each month. It was slightly more expensive each month (but cheaper in the long run) to just do their “Next” thing, where you pay it off over 18-24 months.

    • Tou Karl (@toukale) - 7 years ago

      Enough with this bs. Verizon and all the other US carriers absolutely will still do contracts for existing contract folks. If you are on a contract and wants to renew, nothing will change, it will be business as usual. The only thing that will change are for folks that’s not currently on a contract or new customers to the carriers. How many people you think that will be? a million or less maybe. I see folks keep posting that bs around forums for the past few months that is completely false. If the carriers in the US do away with contracts, then they will have to compete on price (Never going to happen anytime soon). How many people thinks the likes of verizon and at&t are interested on competing on price? Please people do some research before you post things

      • Is that true? Could you post a link to this info? My understanding was that two-year contracts are done and when one runs out, there is no way to renew it. But that was just from reading news coverage of the change, not from digging into Verizon fine print.

      • Mark Rudow (@mprudow) - 7 years ago

        I just got off the phone with a Verizon rep. They will continue to offer a subsidized price to existing customers with a two year contract. Interestingly, he also stated that my monthly bill will remain the same if I either renew the contract and get a new phone, decide not to upgrade, or purchase a phone from apple and activate it with Verizon. The price quoted for a space grey 6s with 64gb was $299. For existing customers who will keep a phone for two years, the contract price seems like the winner.

  3. macmaniman - 7 years ago

    how about i will not buy it?

    • mattmn - 7 years ago

      I agree. I have BYOD users at my company that are still using an iPhone 4S.

    • AeronPeryton - 7 years ago

      Then your chart is very very short, and Apple sells out of the entire first wave of phones 0.001 seconds later than they would have.

  4. Heather Egan - 7 years ago

    There is also an important point missing in this article, probably purposefully but who knows, which is that if you do sign up for a contract with those who still offer them, you’re NOT necessarily locked in as nearly every contract free carrier will buy out your plan by paying the termination fee, if you switch. I’m not advocating getting a discounted phone and then switching (although I have heard of this practice because many will force you to trade in a smart phone – but not THE smart phone – just any smartphone), however it is important to know you’re not stuck.

  5. Stetson - 7 years ago

    It’s probably worth noting that most carriers charge you a lower monthly service bill when you aren’t buying a subsidized phone.

    Moving from $200 up front and a subsidized contract plan to the $27/month payment model with an unsubsidized plan will probably not result in a larger bill. The main difference is that you have more flexibility in when you upgrade and if you choose to keep the phone until it’s paid off then your bill goes down by that $27/month.

    In the old system if you didn’t upgrade your phone every two years you were basically losing money since your bill didn’t go down if you chose to not upgrade.

  6. rwanderman - 7 years ago

    What I understand is that the monthly installment plan can be 12 or 18 months and has no interest. There’s no downside to an installment plan that I know of and I look at it like a 0% car loan, not a lot of reason not to do it.

    I noticed the British spelling of “installment” (one “L”).

  7. 89p13 - 7 years ago

    Ben – I follow your plan – except that I sometimes hold on to a phone rather than selling it.

    One thing that AT&T – and maybe other US-based carriers do – is to charge you a $15 to $25 dollar fee to “Switch your phone” – even though they are doing nothing: You remove your AT&T SIM from your old phone and re-install it in your new phone, but the carrier sees this as a chargeable fee. When I buy my phone from Apple – unlocked and carrier free – I don’t get charged this “fee” as the carrier doesn’t see the switch.

    YMMV

    • Ben Lovejoy - 7 years ago

      Yeah, my carrier of the moment doesn’t get involved at all when I upgrade either iPhones or iPads.

  8. Daniel Ackermann - 7 years ago

    The chart is a little out of date. Choosing a 2 year upgrade does not keep your bill the same. I’ve outlined my experience here: https://medium.com/@danielackermann/the-end-of-the-two-year-phone-upgrade-dc573b78f0e5

  9. patstar5 - 7 years ago

    I’ll stick to my unlocked android phones. My oneplus one was $350 for 64gb. An iPhone 6+ would be $850 with same storage.
    So no thank you Apple
    I can’t believe people pay hundreds of dollars for a phone
    We’re at a point where you can get a decent phone for $200 off contract

  10. Verizon and others basically give the phone away on multi-line plans. $27/month payment plan x 24 months, but concurrent 24 month $25/month discount for using EDGE, for instance.

  11. flygliea113 - 7 years ago

    I hope they reconsider having the options of contracts when the iphone 7 comes out

Author

Avatar for Ben Lovejoy Ben Lovejoy

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!


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