Is Apple's iPhone Upgrade Plan a Good Deal? Sort of

At yesterday's unveiling of the iPhone 6s and 6s Plus, Apple also announced an iPhone Upgrade Plan. The pitch is simple: pay for your phone in monthly installments with $0 down and get a new iPhone every year. Most of the big carriers have moved away from contracts and subsidized phones, so this upgrade plan is a natural fit. But is it a good deal and should you do it? Well, that depends.

First, some details. The iPhone Upgrade Plan includes AppleCare+, but the fine print reads:

AppleCare+ for iPhone provides coverage for up to two incidents of accidental damage from handling. Each incident is subject to a service fee plus applicable tax ($79 for iPhone 6 or earlier models, $99 for iPhone 6s or iPhone 6s Plus).

AppleCare+ extends the standard warranty and provides support, but the handling fees aren't that much less than common repairs such as screen replacements. The iPhone Upgrade Plan requires a 24 month installment loan with Citizens Bank and activation with Verizon, AT&T, T-Mobile, or Sprint. You're eligible for a new iPhone after 12 payments, and the old device must be traded in when upgrading. The website doesn't exactly specify, but I'd imagine a new 24 month loan is required every time you upgrade.

In the past, the only way to get a new iPhone every year was to buy a model at full price or with a carrier's early upgrade plan. So, how does this new plan compare financially?

 Apple's iPhone Upgrade Plan vs AT&T Next and other options

Apple's iPhone Upgrade Plan vs AT&T Next and other options

A new base model iPhone has a full retail price of $650. Apple's upgrade plan would cost $778 over two years, or $32.41 per month. AT&T Next has a similar plan that is available for an upgrade after 12 payments, and costs the same price (plus $15 upgrade fees) but does not come with AppleCare. AT&T's upgrade plan also includes a discount of $15-$25 per month on Mobile Share plans, which isn't captured here. Other carriers do not have one-year upgrade plans advertised on their websites.

The other option would be to buy a new iPhone at full price every year and sell or trade in the old device. This would save a considerable amount of money, but again doesn't come with AppleCare and requires the hassle of selling the old device. (I assumed a $400 sell price for the old device, based on eBay sales data. In my experience, Craigslist would fetch about the same. Trading in to Gazelle or Amazon would bring in considerably less money.)

All the carriers also offer 24 month financing options, which is less expensive than Apple's plan - but you only get a new device every two years and they don't include AppleCare.

In conclusion, the iPhone Upgrade Plan isn't the least expensive way to get a new iPhone every year. It is, however, a great option for people that want AppleCare and/or don't want to deal with the hassle of selling old iPhones on Craigslist every year. It fits well with the carriers' new contract-free plans, but won't work with prepaid plans. It is also nice to have a monthly bill that's always the same versus large expenses once per year. This plan should be attractive to many iPhone fans.