Pricing for the latest iPhone is a lot more complex now - in the US, anyway.
Apple has announced the iPhone Upgrade Programme. It's like a monthly-installment plan that will let you buy a new, unlocked iPhone from Apple and upgrade to the latest model every year. Major US carriers already offer similar upgrade plans, but with this initiative, Apple is in control.
You will buy your new, unlocked iPhone directly from Apple - and it'll work with cellular service plans provided by Verizon, AT&T, T-Mobile, or Sprint, etc. Simply pick a carrier, and then pay Apple every month for your new phone.
To help you better understand how this programme works, Pocket-lint has explained how Americans have always bought their phones on two-year contracts but are more recently switching to monthly-installment plans.
We of course also explained everything we know so far about the iPhone Upgrade Programme...
What is Apple's iPhone Upgrade Programme?
Apple's iPhone Upgrade Programme is basically like the monthly-installment plans offered by most major US carriers. Keep reading to learn more about Apple's programme in comparison to carriers' monthly-installment plans.
How do Americans typically buy iPhones?
Americans tend to pick a carrier (like Verizon), and they directly buy their phone - whether it be an Android, Windows phone, iPhone, etc - from that carrier. More than 60 per cent of consumer-purchased smartphones are actually bought from a carrier's retail store or website, according to comScore.
When Apple launched the original iPhone, the first US carrier to offer it (AT&T) realised customers probably wouldn't like the phone's expensive price tag. So it decided to offer the iPhone at a cheaper price up front, but in exchange, you had to agree to a 24-month contract/two-year agreement.
With this setup, a $649 iPhone drops down to $199 with a contract. You pay the carrier $199 upfront and then select a cellular service plan. But carriers charge a fee on top of the plans they provide so they don't eat the cost of giving you an iPhone for cheap. A $20 service plan might therefore end up costing $45 a month with the fee included.
By paying the $45 a month for two years, you're essentially buying an iPhone at its full price. You didn't get it for cheap. To ensure you pay the full price, carriers prevent you from upgrading annually by enforcing upgrade fees. So, you get an iPhone for $199 instead of $649, but now you must pay the difference (plus more) over two years.
This is the typical way Americans buy their iPhones. That is until carriers started ditching two-year agreements in favour of monthly-installment plans.
Do US carriers offer monthly-installment plans?
All the major carriers in the US have recently begun offering monthly payment plans and phasing out two-year agreement options. T-Mobile was among the first to go this route, while in August, Verizon said it planned to ditch two-year agreements too. Sprint will do the same by the end of the year, but AT&T hasn't given them up yet.
It's part of an ongoing shift in the industry. US carriers are basically eliminating the old-standard practice of signing customers up for two-year agreements and offering subsidies to lessen the high cost of smartphones. Now, major carriers offering new types of plans that are sometimes cheaper but require you to pay for your own device.
How do monthly-installment plans work?
Take the total cost of your phone and divide it by 24 to get your cost each month (excluding taxes). A base model iPhone 6S costs $649, so that's roughly $27 a month. If you're wondering how that differs from carriers charging customers a fee on top of their service plans, keep in mind monthly-installment plans let you upgrade whenever you want.
That's right. You can upgrade annually if you want - as long as you pay off your device. There's no upgrade fees either. The other advantage to monthly-installment plans is that you can leave your carrier whenever you want. If you suddenly want AT&T instead of Verizon, you aren't locked into a multi-year contract and can just leave.
So, based on a set of 24 installments, you can expect to pay at least $27 a month for the iPhone 6S or $31 a month for the iPhone 6S Plus - on top of your cellular service plan. If you decide to leave your monthly-installment plan early, you will be on the hook for the full price of your iPhone.
How does the iPhone Upgrade Programme work?
Under a typical two-year agreemnt, you can get an iPhone 6S for $199 or the iPhone 6S Plus for $299 - on top of fees as well as your cellular service plan. Alternatively, you could go with a monthly-installment plan and pay $27 a month for the iPhone 6S or $31 a month for the iPhone 6S Plus. But now, thanks to Apple, you also have a third option.
Apple is offering its own monthly-installment plan to customers. It's cutting out the middle man (aka US carriers). Apple's initiative offers you a new, unlocked iPhone every 12 months - and it's covered by an AppleCare+ warranty. Costs range between $32 and $45 a month, depending on the model you choose and its hardware configurations.
By enrolling in Apple's iPhone Upgrade Programme, you'll pay Apple directly for your new iPhone instead of a carrier, but because Apple has so much influence in the mobile industry, all major US carriers are on-board with the Upgrade Programme. You'll therefore still be able to get your cellular service from AT&T, Sprint, T-Mobile, or Verizon.
This is a great option for those of you who want the latest hardware every year and prefer to live in the Apple bubble. Apple's 24-month installment plan starts at $32 per month, which gets you the base level 16GB iPhone 6S. Despite the 24-month payment period, customers will still be able to upgrade to the latest iPhone every year if they want.
Apple has confirmed the ability to upgrade once per year via the Upgrade Programme's website: "After 12 installments, you can get a new iPhone and start a new iPhone Upgrade Program. No more waiting for your carrier contract to end. Just trade in your current iPhone for a new one, and your new program begins."
When will the iPhone Upgrade Programme be available?
The iPhone Upgrade Program will be offered only at Apple Store locations in the US. If you're interested, you can make a reservation to participate starting at 12:01 am PT on 12 September (also when the new iPhone preorders launch).
Want to know more?
Check out Apple's programme page for more details.