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Is the iPhone Upgrade Programme really worth it?

Joe Howell's picture

iPhone Upgrade Programme

It's been almost a year since the iPhone Upgrade Programme launched in the US, and with the UK being Apple's most important market in Europe, we're expecting to see it hit our shores in time for the iPhone 7 launch.

At its core, the Upgrade Programme is a finance option that splits the cost of your iPhone over a 24 month period. Apple doesn't charge any interest on this loan, but they do require you to purchase AppleCare+ as part of the deal. The clue's in the name, but the primary selling point of all this is that you can upgrade to the next iPhone after 12 monthly payments by simply returning your current device and signing up to a new 24-month contract. This makes it a lot more flexible than buying your iPhone from a mobile phone network, where you can typically only upgrade every 24 months.

How much will it cost?

As the iPhone Upgrade programme hasn't launched yet, we can't be certain what the prices will be. However, based on US pricing, if you want to buy an iPhone 7 16GB on the iPhone Upgrade Programme we expect it to cost:

£539 (for the device) + £109 (for AppleCare+) = £648 over 24 months, £324 annually or £27 a month.

You'll also have to purchase a SIM for your iPhone from a UK mobile phone network. You can get 2GB of data, 500 minutes and unlimited texts from a £12 giffgaff SIM - so that would bring the total monthly cost up to £39.

What do you get?

For no upfront cost and £27 a month you'd get a shiny new iPhone 7, with the option to swap to an iPhone 7s/8 when that launches a year later. You also get AppleCare+, an insurance product that offers an extended warranty and some limited protection against accidental damage.

Is the iPhone Upgrade Programme worth it?

While some people will appreciate the convenience of financing their iPhone through Apple, we don't think it makes much financial sense. Here are the main reasons why:

You're forced to buy AppleCare+

We conducted a fairly detailed review of AppleCare+ and found that, while it's cheaper than a standalone insurance product, the level of protection is really very poor. Cover for accidental damage is limited to just 2 claims, the excess is very high at £79, and there's no cover for other dangers like theft and loss (which account for around 20% of claims). Also, EU law requires that Apple offers a 2-year warranty on iPhones as standard, so you don't really need to pay for AppleCare+ to get this.

There are cheaper ways to upgrade each year

Assuming that you have the cash to buy your iPhone outright, or have access to 0% finance, there are cheaper ways to upgrade your iPhone each year.

If you buy an iPhone 7 16GB direct from Apple it will cost you £539. Based on current Mazuma recycling prices, we'd expect you to get around £300 for it in a year's time should you want to buy the iPhone 7s/8. That means that it effectively costs you £239 a year or £19.91 a month to get a brand new iPhone whenever one launches. That's £85 cheaper than via the Upgrade Programme. Of course, that saving is largely down to cutting out AppleCare+, but given that it doesn't offer much in the way of cover this seems like a sensible trade.

By going the extra mile and buying your iPhone SIM-free from a reseller like giffgaff or Carphone Warehouse you could save an additional £40 a year. Plus, if you sold your iPhone 7 on eBay instead of recycling it, you could make back around £50 more than recycling it. Both of these together would bring the annual cost of owning the latest iPhone down to just £149, or just £12.42 a month - a saving of over £14 a month compared to the iPhone Upgrade Programme! That means that you can buy a comprehensive iPhone insurance policy for around £7.50 a month to protect your new phone and still have saved £7 a month.

Which is right for me?

Ultimately it's up to you to decide if the iPhone Upgrade Programme is right for you. If you're desperate to have the latest iPhone each year, are unlikely to damage your phone and aren't particularly worried about paying more for convenience, the iPhone Upgrade Programme might appeal.

However, through a bit of shopping around you can save a lot of money, and get a much more comprehensive insurance policy, by financing your annual iPhone purchase in the way we describe above.