A few days ago, I explained how upgrading your iPhone annually can be surprisingly affordable, once you figure in the device’s depreciation and resale values.
Here are some follow-up questions:
What about upgrade cycles longer than two years? How do they compare to upgrading annually?
In the earlier post, I concluded that upgrading annually (versus upgrading every two years) costs about $80 total ($40 per year of use). We can do this same math for a three-year upgrade cycle by starting a year earlier (with the iPhone 6):
| One-year upgrade cycle | Model | Date | |
| 1st iPhone retail purchase | iPhone 6 | 9/2014 | ($649) |
| 1st iPhone sale via Swappa | iPhone 6 | 9/2015 | $411 |
| 2nd iPhone retail purchase | iPhone 6s | 9/2015 | ($649) |
| 2nd iPhone sale via Swappa | iPhone 6s | 9/2016 | $411 |
| 3rd iPhone retail purchase | iPhone 7 | 9/2016 | ($649) |
| 3rd iPhone sale via Swappa | iPhone 7 | 9/2017 | $411 |
| TOTAL | ($714) |
| Three-year upgrade cycle | Model | Date | |
| 1st iPhone retail purchase | iPhone 6 | 9/2014 | ($649) |
| 1st iPhone sale via Swappa | iPhone 6 | 9/2017 | $186 |
| TOTAL | ($463) |
Compared to an annual upgrade, the three-year upgrade cycle saves you $251 over the three years. That’s more savings per year ($84) compared to a two-year cycle ($40); a new phone loses more value in the first year of ownership than in the second.
A few thoughts:
- Three years is a long time in the gadget world. Your mileage may vary, but I would rather not use a three-year-old handset. Don’t judge me.
- One thing I didn’t address in the previous post? Warranties. I don’t buy Apple’s “AppleCare+” protection plan, which means I only receive the default, year-long warranty. That works out great if you upgrade annually; your phone is never more than a year old,[1] so it’s always covered. Obviously, your risk increases if you hold onto your phone past that warranty window. You’re more likely to experience hardware failure in years two and three; if something breaks, you’ll be stuck paying for out-of-warranty repairs.
- What about a four-year phone upgrade cycle? I have a friend who’s planning to upgrade his 5s this fall. Swappa says that a baseline AT&T 5s is worth about $92. By my math, he saved about $99 per year ($395 total) versus upgrading annually. Then again, retaining a phone for four years has some serious drawbacks. After 1,400+ charge cycles, a lithium-ion battery will be in rough shape.[2]
What about the new iPhones, with their higher prices? How will the upgrade math work out?
Both the iPhone 8 and 8 Plus saw price bumps over the equivalent 2016 models, and the iPhone X’s $999 starting price is a complete wild card. How will the resale values for these devices track after a year on the market?
The short answer is “We don’t know.” However, we can look at legacy Plus models to see if our math applies to the higher-priced phones. Based on a quick glance at Swappa, both the iPhone 7 and the 7 Plus retained about 73% of their retail value after eleven months on the market, and the 6 and 6 Plus retained somewhere around 45% of their retail price after twenty-three months. It seems reasonable to assume that the 8 and 8 Plus resale values will trend similarly.
Keep in mind, though, even if the higher-priced models lose a similar proportion of their value, you’ll lose more in actual dollars over time, compared to the cheaper devices. A new iPhone 7 purchased in September 2016 depreciated $177 (i.e., 27%) in its first eleven months of ownership, while a 7 Plus lost $207 in value (again, 27%) during that same time span.
What about the iPhone X? Will it be worth just $730 (73% of its retail price) a year after its release? It’s hard to say. We don’t know how well the devices will sell, and, critically, we don’t know Apple’s plans for iPhone pricing in 2018. If consumers balk at paying $1000+ for a new phone, might Apple release an “iPhone XI” at, say, $899? If so, the original X’s resale value would immediately take a hit. ■
Matt Hauger 