A new study shows that you may pay more for the new iPhone in 2014, even if the iPhone 6 price remains the same and you score a $0 down deal on one of the new carrier plans that lets you upgrade faster and more frequently.
For months analyst after analyst have offered predictions that the iPhone 6 price will climb as Apple looks for a way to maintain current profits while offering bigger iPhone 6 screen sizes, a new design and a more expensive Sapphire cover that could keep the display looking like new for years.
The iPhone 5s price is still $199, just like the last several iPhone models, but over the last several months the price that shoppers pay for the iPhone 5s dropped dramatically on a contract as Best Buy and other retailers including Verizon cut $100 or more off the price. As consumers shift to waiting for the iPhone 6 we will likely see more iPhone 5s deals over the summer and into the fall.
Even if Apple and carriers keep the iPhone 6 price in the same spot, at $199 on a contract and $649 off contract a new analysis of carrier plans that offer $0 down but charge users for the full price of the phone show that many users may still end up paying more for the new iPhone over 2 years than they did for the iPhone 5 or whatever device they are upgrading from.
T-Mobile kicked off the trend with Jump, and in 2013 Verizon, Sprint and AT&T joined the idea and pitched the new plans as a cheaper way to buy a phone without signing a service contract and as a way to upgrade to the latest and greatest smartphones faster. Many of these offers include the ability to pay nothing but taxes for the iPhone 5s or Galaxy S5 when you pick it up, but to pay $25 to $33 a month as part of a payment contract that lasts 12 to 24 months.
Most of the time paying for a phone like this will result in a slightly cheaper monthly bill because the carrier is not paying for the extra $450 cost of the iPhone that you didn’t pay. The hope as a consumer is that with a cheaper monthly payment for your calls and data and $0 down you’ll save over buying a phone on a contract, at least after two years. Carriers typically offer a discount of $10 to $25 on a monthly plan when using one of these new offers where you the consumer pay full price for the phone.
All of this sounds like the iPhone 6 price may not matter as much, especially if carriers offer a discount on service and split out the payment of the phone over 24 months, but a report from Macquarie Research, shared on Business Insider, tells a different story.
The firm estimates that after one year, customers that choose the installment plan will pay $74 on average more than those that used the more traditional contract approach and paid $199 upfront plus a $35 activation fee. That is almost $150 after two years, which is nearly enough to buy a new phone.
Consumers are already warming to the idea of paying for an iPhone in installments and 43% of all smartphone sales may be sold with this type of plan by the end of the year. The iPhone 6 release date is rumored for September, and even if the iPhone 6 price remains at $199 nearly half of the people who buy an iPhone 6 may pay carriers a $148 premium, according to these estimates.
One issue with this calculation is the $38 price that the Macquarie Research uses for the monthly payment. This is higher than the sticker price for most monthly payments, but with tax included it can jump to around $35.
This all assumes Apple keeps the iPhone 6 price at $649 off contract and carriers price it at $199, which may not be the case. If Apple adds a larger screen with Sapphire it could bump the company’s cost up and the price may rise to help Apple keep their high profit margins. Apple currently makes about $450 on each 16GB iPhone sold, after you factor in a build cost of just under $200.
Reports suggest the iPhone 6 features will include a new design that is slimmer, but bigger to accommodate a 4.7-inch display and a second 5.5-inch iPhone 6 is rumored. Apple invested half a billion dollars into a Sapphire production company last year, which may make a new part of the display to better protect against scratches. It is not clear exactly what camera upgrades users will see, but rumors suggest bigger pixels and some type of image stabilization. According to Andy Hargreaves, an analyst at Pacific Crest, Apple can charge a premium for an iPhone with a larger screen.