For the past few years I have always bought my phones direct from Apple, without contract, and have assumed that it is the cheapest way to smartphone ownership. I am always suspicious of the carriers’ hire-purchase deals which are seldom the most cost-efficient solution. I buy new and sell after a year or two and the difference is my ownership cost. But what if I forget all about ownership and regard the phone as a rentable commodity?
Apple’s new upgrade programme has piqued my interest. While I have no idea as yet whether it will be extended to the UK, my initial impression of what is in effect a phone rental scheme is positive. By removing the carrier contract from the equation, it is far easier to look at the Apple deal and work out whether you are better buying outright or renting. It is also positive that the scheme includes Apple Care. Spreading the cost over a couple of years without interest is a good deal by anyone’s reckoning. And the ability to change every year on a rolling contract arrangement is a killer feature. In effect Apple will buy back the one-year-old phone at half its original price. In return, they sell another new phone and lock in the buyer for two more years.
It is certainly a potential money spinner for Apple, given that the programme will lock in consumers to the brand. That’s if they aren’t already locked in by the incomparable Apple eco-system. If this takes off, I see it as one of Apple’s smartest moves of 2015, if not the decade.
Freed of the need to sell the old phone before upgrading, most people will be receptive to early upgrades, perhaps deciding that it makes sense to take a new device every year rather than every couple or three years as at present. Apple’s well-known value retention will be an important part of the equation. It’s the same with car leases—more expensive but slowly depreciating vehicles can sometimes work out cheaper than low-cost loss makers.
The scheme can only be good for consumers since it will force telecom companies to compete by making their existing schemes cheaper. Apple, though, has the ace card in providing unlocked phones which allow consumers to change carrier at whim. There are currently many excellent SIM-free deals for owners of unlocked phones and the competition will be healthy.