It used to be that almost everyone bought an iPhone the same way: Sign a two-year contract, and you get the phone for a relatively modest up-front cost. The difference between the full retail price of the phone and what you paid was hidden in the cost of your monthly plan.
Things have gotten a bit more complicated in the past couple years, however, as most carriers are abandoning these kinds of contracts (or at least shifting away from them) in favor of selling phones at full price up front or offering financing or leasing programs to spread that cost—transparently—over a year or more. Even Apple has started offering financing plans.
Here’s a look at the various options you have for purchasing a new iPhone in the United States, either directly from Apple or through one of the four major carriers (AT&T, Sprint, T-Mobile, and Verizon). For the most part, the discussion below assumes that you’re not currently tied to a carrier contract that would prevent you from purchasing a new phone. If you’re on such a contract, or if you live in an area where a particular carrier has especially bad or good service, those factors will of course affect your decision.1
The big takeaways
We get into the details (and costs) of all the options below, but here’s the executive summary:
If you want to own your phone immediately so you have the flexibility to sell that phone or upgrade it at any time, buying it outright is the way to go—but of course this option has the highest initial cost ($749 for a 64GB iPhone 6s, for example). The price is the same from Apple or any carrier, but buying from Apple likely means easier (or at least quicker) unlocking.
For the simplest way to upgrade yearly, regardless of your carrier, Apple’s iPhone Upgrade Program is the best bet. This financing plan simply splits the cost of an iPhone and AppleCare+ over 24 months, with no fees. (For example, you’d pay around $37 per month for a 64GB iPhone 6s with AppleCare+.) After 12 months of payments, you can return that phone to get a new one and start a new financing plan. Verizon offers a similar financing plan, but Apple’s is a better option, even for Verizon customers—you save only about $5 per month with Verizon, but you lose AppleCare+. AT&T also offers financing plans, but if you expect to upgrade annually, you’ll pay less each year with Apple’s plan than with AT&T’s.
If you want AppleCare+ coverage, Apple’s iPhone Upgrade Program is especially appealing, because you’ll pay only $64.50 per year if you upgrade annually—when you upgrade to a new phone, the financing plan and the AppleCare+ contract both renew. Purchasing an iPhone from a carrier, or from Apple at full price, requires you to purchase a new $129 AppleCare+ plan each time you change phones, because the plan is not transferable.
For the lowest monthly payments, the option to upgrade more frequently than once per year, and the option to buy the iPhone later at less than MSRP, T-Mobile’s current promotional leasing plans are very attractive, especially if you have a recent smartphone to trade in. For example, with a $100 down payment and an iPhone 6 to trade in, you’d pay (after bill credits) only $4 per month for a 64GB iPhone 6s. In addition, if you decide to buy that iPhone 6s, the net cost (again, after bill credits) will be less than buying the phone at list price—and the more monthly payments you make, the more bill credits you receive, so the lower the net cost of the phone. T-Mobile is also attractive if you’re thinking of switching carriers, thanks to other generous incentives. However, first make sure T-Mobile’s cellular coverage is solid in the areas you’ll be using the phone.
Sprint has similarly inexpensive leasing plans, but with fewer “switcher” incentives and no savings without a trade-in. We also don’t recommend Sprint as a carrier.
Read on for all the details.
Paying in full up front
Simple, and you can upgrade at any time.
The least complicated way to buy an iPhone is to pay for it outright, at a cost of $649 or more depending on storage capacity (16 GB, 64 GB, or 128 GB) and screen size (iPhone 6s or 6s Plus). All four major US carriers (AT&T, Sprint, T-Mobile, and Verizon) offer the option to pay in full, as does Apple itself.
With this approach, you pay full price for a new phone each time you upgrade, though you can sell your previous phone to help defray the cost. Buying outright obviously has the highest up-front cost, but requires no hoops to jump through and no long-term commitments.
Note that when you buy from a carrier, you get a phone set up for that carrier’s network. However, carriers are obligated to unlock fully paid phones—if not immediately, then within a relatively short time frame (a few months). Similarly, if you buy directly from Apple over the first few months of a new phone’s release, your phone will be tied to your carrier network—this practice is an attempt to reduce the number of phones that scalpers can buy and resell—but you can ask your carrier at any time to unlock the phone. Apple usually starts selling fully unlocked iPhones a few months after their debut.
Using an “upgrade” plan
Spread the cost over monthly payments.
If you don’t want to pay the full cost of the phone up front, all four major US carriers, as well as Apple itself, offer plans that spread the cost over monthly payments. Depending on the plan, you’re either leasing your phone (making payments to use it for a particular length of time, after which you’ll return it to the carrier) or financing its cost (making payments toward full ownership of the phone).
Financing plans are generally (but not always) the better approach if you want to spread the cost of the phone over, say, 24 months and wind up owning the phone at the end of the payment schedule. A lease is a good option if you want to upgrade to a new iPhone every year, trading in this year’s handset. However, making matters more confusing, both leasing and financing plans offer options for upgrading your phone after a given amount of time, and most give you the option to “pay off” the phone to own it—letting you then sell it, if you want. So the distinction between leasing and financing is, for the most part, academic.
We discuss below the different payment plans that Apple, AT&T, Sprint, T-Mobile, and Verizon offer. Because we highly recommend staying away from 16GB iPhones, our calculations are based on the $749 iPhone 6s with 64 GB of storage; picking a different capacity or opting for the iPhone 6s Plus will of course affect the costs. We also briefly address AppleCare+ and carrier insurance plans.
As mentioned above, an alternative to choosing an upgrade plan is to purchase the phone outright and then sell it the following year to help defray the cost of your next phone. But if you cringe at the idea of paying $650 to $950 up front, note that you could also take this approach using an upgrade plan: You’d make monthly payments until you’re ready to upgrade, at which point you’d pay off the balance of the phone’s price to own it—and thus sell it. This approach might even save you more money than upgrading through the upgrade plan. For example, last year’s 64GB iPhone 6 in good condition is currently selling for $400 to $500 on the used market; applying that amount to the cost of an iPhone 6s would likely save you more, overall, than if you were on an upgrade plan and upgraded to the iPhone 6s through the plan. The downside to this approach is having to deal with the messy process of selling the phone, and the market for selling a phone may of course change over the next year. But it’s still something to keep in mind.
Apple’s iPhone Upgrade Program
A simple choice for annual upgraders who want AppleCare+.
Apple’s iPhone Upgrade Program is simple and straightforward, though it isn’t always the least-expensive option. (It’s also available, at least for now, only in Apple retail stores.) For fixed monthly payments—the only up-front cost is the sales tax on the phone’s full retail price, assuming your state has sales tax—you get an unlocked phone (initially activated on the carrier of your choice) with the AppleCare+ Protection Plan bundled in. Those monthly payments are simply the retail price of the phone plus the price of AppleCare ($129), divided by 24 months.
After 12 months of payments, you can trade the phone in, which cancels that payment plan and starts the whole process over again with a new phone. Alternatively, you can make payments for the full 24 months and own the phone. (When you finance with Apple, you’re actually taking out a 24-month, no-interest loan with Citizens One—Apple isn’t involved with the financial side of the agreement.)
For example, under the iPhone Upgrade Program, a 64GB iPhone 6s costs $36.58 a month ($749 plus $129 divided by 24). If you upgrade to a new phone after 12 months, you will have paid $439. After 24 months, you will have paid $878—the full value of the phone plus $129 for AppleCare+.
Because the phone isn’t tied to a carrier, you can move it to another carrier at your convenience. We also prefer AppleCare+ to carrier insurance plans because of its lower monthly cost and lower per-incident deductible, though unlike most carrier plans, AppleCare+ doesn’t cover loss or theft—only accidental damage and standard warranty issues—and you get only two claims over the plan’s two years. (If you upgrade your phone after the first year, the counter resets—the new phone gets the full two years of coverage.)
AT&T
The highest price for annual upgraders.
AT&T offers several financing options, depending on whether you’d rather pay nothing up front or make smaller monthly payments. If you want to be able to upgrade after the first year, either the AT&T Next 12 plan or the AT&T Next Down Payment plan is the best bet—though given the current promotions the other carriers offer and the benefits of Apple’s upgrade program, we recommend against AT&T’s Next plans in general right now.
The Next 12 plan requires $0 down regardless of which phone you choose, with monthly installments of $37.50 for the 64GB iPhone 6s. The Next Down Payment plan requires a 30 percent down payment, but you then pay less each month—for example, for a 64GB iPhone 6s, you’d pay $225 up front, but the subsequent monthly payments would be only $18.75. (For both plans, you pay local sales tax, if applicable, when you get the phone.)
With both plans, you can upgrade to a new phone after a year by turning in the current phone and starting a new plan (at which point you will have paid $450 on a 64GB iPhone 6s).
Alternatively, you can choose to continue making monthly payments until you’ve paid the full retail price of the phone, at which point you’ll own it. (This will take 20 months on the Next 12 plan, or 28 months on the Next Down Payment plan.) Or you can pay the remaining balance of the price of the phone at any time to own it earlier.
For even lower monthly payments, AT&T also offers the Next 18 and Next 24 plans. Next 18 requires lower payments than Next 12, but you can’t upgrade until after 18 months; similarly, Next 24 has even lower monthly payments, but you can’t upgrade until after 24 months. As with Next 12, when you upgrade to a new phone, you have to turn in the old phone—if you want to own a phone, you must pay the remainder of the cost of the phone (a total of 24 months of payments for Next 18, or 30 monthly payments for Next 24). Given how long you must wait to upgrade, and the fact that you’re getting no discount off the price of the phone, neither of these plans is appealing.
If you want to upgrade earlier, the Next plans let you do so at any time after the first two monthly installments. However, you must pay the remainder of the amount it would normally cost you to upgrade after 12 months (Next 12 or Next Down Payment), 18 months (Next 18), or 24 months (Next 24)—and you must turn in the phone. So, for example, the Next 12 plan charges $37.50 per month for a 64GB iPhone 6s; your normal upgrade period is one year, at which point you will have paid $450. So to upgrade after two months, you’d have to pay $375 ($450 minus $37.50 minus $37.50) and turn in your phone. To upgrade after six months, you’d pay $225 and turn in your phone. These are terrible deals on the Next 12 plans, and they’re even worse on the Next 18 and Next 24 plans. (You’d be better off paying off the full value of the phone and then selling it.)
Of AT&T’s options, Next 12 makes the most sense for annual upgraders because it doesn’t lock you into a longer-term commitment; and though you have larger monthly payments than with AT&T’s other plan, you end up paying less of the total cost of the phone before trading it in than with those plans. However, assuming you upgrade your phone every year, you’re paying more over the course of that year ($450 for the aforementioned 64GB iPhone 6s) than you would through Apple’s upgrade program ($439)—and Apple’s program includes the added protection of AppleCare+. If you’re sticking with AT&T, we recommend Apple’s iPhone Upgrade Program unless for some reason (credit history or distance from an Apple Store, for example) you can’t take advantage of that program.
(Note that if you use AT&T and subscribe to one of the company’s Mobile Share Value plans for phone/data service, you get a service discount of $15 or $25 per month by bringing your own phone. However, it can be a phone you’ve purchased elsewhere, a phone you’re financing through Apple’s iPhone Upgrade Program, or even a phone you’re financing through one of AT&T’s own Next plans. So this discount doesn’t affect where or how you should buy your phone.)
Sprint
Inexpensive, but recommended only if you’re tied to the network and you never want to own your phone.
If you’re stuck with Sprint for some reason—it’s not a great carrier for most people—and you have an iPhone 6 or iPhone 6 Plus to trade in, Sprint’s monthly prices are crazy competitive thanks to current promotions. The company’s low-cost iPhone Forever plan is essentially designed as a continual lease: Every year, you turn in your phone for a new one. For example, turn in an iPhone 6, and you pay only $5.77 a month for a 64GB iPhone 6s. (You might see a $1 monthly rate advertised, but that’s for the 16GB model, which we don’t recommend.) Over the course of a year, that adds up to $69.24, at which point you can upgrade to next year’s iPhone model, although that phone’s monthly payment will jump to the standard rate of $22 per month.
Trading in an iPhone 5s gets you a promotional rate of $14.77 per month for a 64GB iPhone 6s on the iPhone Forever plan; any other working, unlocked smartphone gets you a $19.77 monthly rate. In these cases, your cost for 12 months would be $177.24 or $237.24, respectively—after which, again, you’ll be able to upgrade to next year’s iPhone. Without trading in a phone, the monthly rate for the plan is $26.77; after 12 months of payments, you will have paid $321.24. These two numbers (for an iPhone 5s trade-in and for no trade-in) are slightly lower than T-Mobile’s promotional prices, below—over the course of 12 months, you’d pay a total of $30.76 less with Sprint if you trade in an iPhone 5s, or $7.76 with no trade-in—but T-Mobile is a much better carrier for most people.
If you’re stuck with Sprint, the way to get the most out of the company’s promotional pricing is to trade in a recent smartphone, make 22 months of monthly payments on a 64GB iPhone 6s, and then pay a final “balloon payment” of $187 to own the phone. This option gets you the iPhone 6s for a total of $313.94 if you trade in a (fully paid) iPhone 6, $511.94 if you trade in a iPhone 5s, or $621.94 if you trade in any other smartphone. You can then keep the phone or sell it.
(If you don’t trade in a phone, and you want to own this one eventually, you’ll end up paying the sticker price of the phone over 22 months—there’s nothing appealing about the Sprint plan in this scenario compared with other carrier’s financing plans.)
Alternatively, Sprint offers a $0-down financing plan called Easy Pay. You pay the full price of the phone over 24 months—resulting in monthly payments of $31.25 for the 64GB iPhone 6s—and you own the phone at the end of the 24-month term. You have no reason to do this with Sprint, however, as opting for the company’s own iPhone Forever plan without a trade-in gets you to the same place a couple months early (after 22 months of lower payments and the aforementioned balloon payment) and also gives you the option to upgrade your phone after 12.
T-Mobile
The most complex option, but the lowest monthly payments and the best way to get an iPhone at a discount.
T-Mobile’s current promotional lease plans are quite appealing, though a bit more confusing than the options from other carriers. The company’s Jump On Demand plan divides the price of a 16GB iPhone 6s over 24 months to arrive at a base rate of $27 per month (or divides the price of a 16GB iPhone 6s Plus to get a rate of $31 per month). But instead of paying a higher monthly rate for more capacity, you tack on a down payment of $100 for a 64GB iPhone or $200 for a 128GB model. With the Jump On Demand plan, you can upgrade up to three times a year: Simply order a new phone, return your old one, and start paying the new phone’s monthly rate.
However, thanks to T-Mobile’s current promotion, you don’t actually pay that base rate. For starters, you get an automatic credit toward your T-Mobile service of $7, $8, or $9 per month (for a 16GB, 64GB, or 128GB phone, respectively). But if you trade in a phone, you get additional credit: $15 more per month for an iPhone 6 or 6 Plus, or one of this year’s Samsung Galaxy phones; $10 more per month for an iPhone 5s or a Samsung Galaxy S5 or Note 4; or $5 more per month for any other phone. In other words, if you trade an iPhone 6 in to get a 64GB iPhone 6s, you’ll end up paying $100 up front and then $27 per month for the new phone—but you’ll be getting $23 in monthly bill credits, for a net monthly payment (taking into account the cost of your T-Mobile service) of $4. You of course have to own the phone you trade in, but T-Mobile will even cover the remaining balance you owe your current carrier to own the phone and then let you trade in that phone.
After 18 months, you can choose to make a $164 balloon payment to own the iPhone 6s outright (or $192 for an iPhone 6s Plus), bringing the total cost of buying our recommended 64GB iPhone 6s to $336 if you trade in one of last year’s phones, well below the $749 retail price. It’s not quite as inexpensive as Sprint’s current offerings, but T-Mobile is a better carrier, you can trade in an Android phone if you’re a switcher, and with T-Mobile you can upgrade to the next phone earlier.
If you decide you want to own your phone before your 18-month lease is up, rather than trade it in for an upgrade, you can, though figuring out what you’ll have to pay might be a bit confusing. First, you get credit for the “full” amount of your monthly payments so far ($27 per month for the iPhone 6s, or $31 for the iPhone 6s Plus)—you get to “keep” the bill credits you received each month. You then pay however many monthly payments, at the full rate, that remain out of 18, plus the final balloon payment ($164 for the 6s or $192 for the 6s Plus). This may sound like a lot, but as long as you’ve made even a single monthly payment (and thus received the bill credits), it’s still less expensive overall than paying for the phone up front—and the longer you make those monthly payments, the more you’ll save.
However, note that if you opt to upgrade or buy the phone early, the next phone you get on T-Mobile probably won’t be eligible for the same promotional rates. The rates are still likely to be less than what you’d get from other carriers, but they won’t be as crazy low as with the current promotions. (T-Mobile’s strategy appears to be to acquire customers with steeply discounted pricing, hoping that many of those customers will quickly “jump” to another phone at full—or at least less-discounted—price. That would be good for T-Mobile, but probably not for you. If you opt for T-Mobile, you’ll save more by sticking with your promotional plan and upgrading after a year or more.)
Finally, note that if you switch to T-Mobile, the company will reimburse you for your current carrier’s early-termination fees and, as mentioned above, any remaining payments on your current phone—you then trade it in to get whatever tier of promotional pricing you qualify for. Also, T-Mobile’s Lifetime Coverage Guarantee lets you walk away with no fees and an unlocked phone after 30 days if you don’t like T-Mobile’s network coverage. (You must continue to make the monthly phone payments, but you can use the phone on any carrier. The downside is that you’ll lose the promotional pricing—your monthly payments will jump to $27.) Alternatively, you can walk away and turn in your phone, and you’re completely free of T-Mobile.
Though the options from T-Mobile and Sprint are somewhat similar, we think T-Mobile’s current promotion is better for most people: T-Mobile is less expensive over the course of the contract if you have no phone to trade in, the lease period is shorter (18 months compared to 21 or 22 months), the final balloon payment to own the phone is smaller ($164 versus $187 for the 64GB iPhone 6s), you can trade in a wider range of phones, and T-Mobile is a more reliable carrier.
Verizon
Roughly comparable to Apple’s financing plan if you know you’re sticking with Verizon and you don’t want AppleCare+.
Our current favorite carrier in terms of coverage offers only a standard financing plan called the Device Payment plan, and it’s the most similar to Apple’s iPhone Upgrade Program: The monthly payment is simply the full price of a given iPhone model divided by 24. (You pay sales tax on the full price of the phone up front.) Pay for the full 24 months, and you own the phone; alternatively, you can turn in your iPhone after 12 months and upgrade to the latest model, initiating a new 24-month financing plan. (Verizon offers the Device Payment plan for other phones, too, but only the iPhone currently gets the option for annual upgrades.) You can even upgrade after only six months if you pay off half the sticker price of the phone, or you can pay off the full sticker price at any time to own the iPhone outright.
Under this plan, a 64GB iPhone 6s costs $31.25 per month; after 12 months, you will have paid $375. This is less than with Apple’s plan but, again, it doesn’t include AppleCare+. If you’re sure you’ll be sticking with Verizon, and if you don’t expect to get AppleCare+ (or if you intend to purchase carrier insurance instead—see below), Verizon’s plan is an attractive, straightforward financing option. But going with Apple’s iPhone Upgrade Program costs only an additional $5 per month, includes AppleCare+, and gives you the option to change carriers at any time.
AppleCare+ or insurance?
In general, we recommend purchasing some kind of insurance for your smartphone, as it’s a very expensive gadget that you likely use—and potentially abuse—daily. You generally have two options: Apple’s AppleCare+ program or insurance from your carrier. Which to choose depends on what’s more important to you: coverage against loss or theft, or everything else.
AppleCare+ costs $129 for two years of coverage if you buy it for a phone you’ve purchased outright or one you’ve bought (or are financing) from a carrier; as part of Apple’s iPhone Upgrade Program, it costs $5.38 per month (with that cost incorporated into your monthly phone payment). Carrier insurance plans range from around $7 per month for AT&T and Verizon to $8 for T-Mobile and $11 for Sprint.
However, the plans aren’t equivalent. An AppleCare+ plan includes free technical support, an extended warranty for hardware and software issues, and coverage of accidental damage. Apple will diagnose problems (by phone or at the Genius Bar at any Apple retail store), offer assistance in using the phone and its built-in apps and services, and replace a defective phone, for no additional charge. If you damage the phone accidentally, a $99 deductible gets you a replacement—usually a like-new refurbished unit. (You get two such claims during the two-year life of the plan; if you’re on Apple’s iPhone Upgrade Program, your plan—and its two-claim limit—renews each time you get a new phone.) This coverage extends to the iPhone’s battery and earphones as well.
Carrier insurance will also replace your phone if it’s damaged or otherwise broken, but the deductible is much higher: $175 for T-Mobile or $200 for the other three carriers. And carrier insurance doesn’t include technical support or hands-on assistance. On the other hand, carrier insurance does cover theft and loss—an appealing advantage.
Overall, we think AppleCare+ is the better option for most people because of the lower replacement deductible, free tech support, and extended warranty. And if you’re paying for your phone through Apple’s iPhone Upgrade Program, it’s built right into your monthly payments for half the cost of buying AppleCare+ separately every year.
On the other hand, if you’re buying your phone through your carrier and you plan to upgrade every year, you’re essentially paying twice as much for AppleCare+, because you can’t transfer it to the new phone when you upgrade—you’ll pay $129, but you’ll lose the second year of coverage when you turn in your phone for an upgrade. In those situations, you’ll want to determine for yourself what’s more important: quality tech support and lower repair and damage-replacement costs, or loss/theft coverage.
That said, if you really need the coverage, nothing is stopping you from getting AppleCare+ and carrier insurance, with the latter essentially serving as loss/theft protection. However, you should first check your homeowner’s or renter’s insurance to see if it includes coverage for smartphone theft or loss.
Footnotes:
1. You shouldn’t worry too much about activation fees, which vary slightly from carrier to carrier. These fees will be much smaller than the amount you’re dropping on the phone, and it’s rarely worth leaving a carrier you like for a meager discount on activation fees. Jump back.
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