Most of us here at HighYa love our iPhones. Personally, I’ve owned every model of iPhone since they were first introduced in 2007 and have been very pleased with my iPhone 5’s performance over the past two years.
However, despite its loyal service, when Apple announced the new iPhone 6, I decided it was time for an upgrade.
After making this decision, the first thing I did was visit the Apple website, where I read that the iPhone 6 was priced starting at $199.
Naturally, I thought to myself, “Why would the company give you a $650 iPhone for only $199? How would this even be profitable? And what’s the catch?”
Well, the truth is my friend, no company is in the business of losing money.
And while you probably already know that you have to sign a 2-year carrier agreement in order to obtain this price, what you may not know is that these carriers make their money back—and much more—by charging you an exorbitant amount of fees.
How much exactly? Let’s find out.
The True Cost of a $199 iPhone 6
In the interest of full disclosure, I’ve been an AT&T customer for years, but if I’m being honest, every time I go into one of their stores or try to interpret one of my monthly bills, I end up more confused than when I started.
However, I can’t help but think this is exactly what carriers want you to experience. After all, we lead busy lives, so most people can’t be bothered to crunch the numbers, and we’ll just pay whatever we’re told to avoid the hassle. Time is money, right?
With this said, here’s what happens if I want to purchase an iPhone 6 for $199 (we’ll use AT&T in this example, but all major carriers work pretty much the same):
First, as mentioned above, you’ll need to agree to a 2-year contract, which locks you into paying a certain amount over the course of 24 months.
If something happens during this time and you decide to cancel your contract, you’ll be charged an early termination fee of “$325 minus $10 for each full month of completed Service Commitment.”
It’s All In the Fine Print
However, if you take a look at your contract’s fine print, you’ll notice that plans are priced differently based on how you choose to purchase your phone.
In the instance of AT&T, you’ll be charged a $15 or $25 data surcharge each month if you buy your iPhone 6 at their discounted price (e.g. $199), although this fee is waived if you purchase your phone under an installment plan.
And if you take $15 per month over the course of a 24-month agreement, this adds a whopping $360 to your overall costs, which is something we’ll talk more about in a moment.
A screenshot of plan options from apple.com
After you’ve agreed to the contract, you’ll then be assessed a $40 upgrade fee, assuming you’re an existing customer and your account is eligible for one.
However, by contacting customer service, this could potentially be waived if you’ve been a long-time customer in good standing. In addition, since the iPhone 6 now comes in two larger sizes, you’ll need to purchase a new case, which can range anywhere from $20 to well over $100.
Adding It All Up
Now that we know more about the true costs associated with purchasing an iPhone 6 at a discounted price, let’s add everything up:
- $199 iPhone +
- $60 sales tax (will vary slightly based on your state) +
- $40 upgrade fee +
- $360 in lost discounts =
$659! This is a long way from “starting at $199” as the company advertises.
And doesn’t even include additional taxes and fees that might be present on your bills!
There Might Be a Better Way
As an alternative to purchasing your iPhone 6 at a discounted price, most carriers offer the ability to finance the full cost of your phone with zero interest over the course of 20 or 24 months (AT&T’s plan is called NextSM).
I first found out about this program when I was helping my parents with their service about a year ago and have been using it ever since.
Basically how it works is this: If you go with the $199 iPhone 6, you won’t be subject to a down payment, and your bill will be increased by $27.05 per month over the course of 24 months, or by $32.45 over the course of 20 months.
Ultimately, when also including the $60 sales tax (again, yours will vary), you’ll end up paying a total of $709. Admittedly, this is higher than the option mentioned earlier, but there are a few distinct advantages by going this route:
- No upfront payment of $199, which reduces your initial costs.
- You qualify for a discounted data plan.
- You aren’t subject to a 2-year contract. However, while there isn’t an early termination fee, you will have to pay the remaining cost of your phone if your contract is terminated before paying it in full.
Bottom Line: Your iPhone 6 Will Cost Much More Than $199
Whether you choose the 2-year agreement option at $659 or the NextSM (or similar option from another carrier) at $709, the bottom line is that your iPhone 6 will ultimately cost you much more than the advertised $199.
In other words, it’s simply a marketing gimmick intended to cause consumers to make uninformed purchasing decisions.
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But the good news, here at HighYa, our passion is helping people just like you to become better informed and to help you save more of your hard-earned money in the process.
But we’re also big fans of the latest technology, so we fully understand that buying a new gadget can be an emotional experience. But instead of letting emotion guide your next phone purchase, ask yourself the following questions:
- Do I really need a new phone? In other words, is my screen cracked? Am I dropping calls, or is my phone malfunctioning in some other way? Or, am I just making an emotional purchase because I want the latest model?
- Do I really need a new phone every 2 years, or can I make my existing one last longer and save money in the process?
- Will I be able to pay for my phone outright, or will it just put me further in debt?
- What else can I use this money on if I decide not to upgrade?
What’s You Experience with Purchasing a New iPhone?
Did you recently purchase the new iPhone 6? If so, do you have any tips or tricks that could help others save even more money? If so, share your knowledge with the world by leaving a comment below!