Your Guide to Buying an iPhone 7: Lease, Two-Year Payments or Pay Up-Front?

The new iPhone 7 from Apple offers across-the-board upgrades to its predecessor, the iPhone 6s.

And while the experts are divided on whether or not this new version is worth buying, we’re more concerned about how you’ll actually pay for your phone should you decide to add it to your tech arsenal.

After the release of the iPhone 6s in Sept. 2015, Apple introduced a new way to pay for your phone: the Upgrade Plan.

Mobile companies have implemented similar plans and trade-in programs, too, hoping to reel in iPhone fans who want to upgrade every year.

Over the next few minutes, we’ll walk you through the cost of the iPhone 7, what type of leases are offered from Apple and the major carriers, why trade-in programs can be tricky and what non-lease options you have.

We’ll conclude our article with our overall thoughts on these various payment and trade-in plans.

The Basics: iPhone 7 Options and Prices

The iPhone 7 and 7 Plus come with three different storage capacities: 32 GB, 128 GB and 256 GB. Here’s a quick summary of the price tag on the six options you have

iPhone 7

  • 32 GB: $649
  • 128 GB: $749
  • 256 GB: $849

iPhone 7 Plus

  • 32 GB: $769
  • 128 GB: $869
  • 256 GB: $969

Paying for your phone can be tricky because Apple and the four major carriers each have their own payment options and those options can sound so similar they’ll confuse you.

Basically, Apple and mobile companies offer two types of plans: those for people who want a new iPhone every year, and those for people who don’t want a new iPhone every year.

Each company has their own name for these programs, but the concept behind them is the same.

Leases: The Plans for People Who Want a New iPhone Every Year

Think of this plan like you would a car lease – they’re designed for you to drive the latest, best cars without any intention of owning the car for more than a few years.

iPhones are different in that you want to upgrade every year instead of every couple of years, but the principle is the same. You’re making payments for a year with the intention of trading the phone in so you can upgrade to the newest model; in this case, next year’s iPhone 7s or 8.

Quick Tips:

  • None of these lease plans require any money down, but all state that you’re on the hook for the remaining retail value of your iPhone 7 if you drop their service.
  • Also, since you’re basically renting these phones (more on that in the T-Mobile section), you have to bring them back in good condition or you might have to pay for damage repairs.
  • Each carrier will charge you an activation fee and upgrade fee, a sum that’s usually less than $100.
  • Each carrier (and Apple) will require you to pay for insurance on your phone.

T-Mobile’s iPhone Lease Plan

T-Mobile offers their gotta-have-the-latest-iPhone customers the Jump! lease program for all models of iPhones. Their financing plan is 23 months, and there is no interest. You pay $0 down if you buy the base model iPhone 7, but you’ll have to pay an extra $100 for every jump you make in storage – 32 MB to 128MB means $100 down, while 32MB to 256 MB means $200 down.

Your monthly payments for a base model iPhone 7 will be around $28 a month. If you sign up for this plan and buy the 32 GB iPhone 7, then your payments at the end of 12 months will total about $432 ($36/month).

When it’s time to upgrade to the newest iPhone, you’ve basically rented your iPhone 7 for $432 for one year of use. To us, that doesn’t seem worth it.

Apple’s iPhone Lease Plan

Apple calls their lease plan the Upgrade Plan, and by joining you sign up for 24 months of interest free payments.  With this option you can get the newest iPhone every year if:

  • You’ve made at least 12 months of continuous payments on your previous payment plan
  • You’ve got a record of on-time, up-to-date payments 
  • You’ve maintained AppleCare on your phone the entire time it’s been financed

If you absolutely can’t wait to buy the new iPhone and you’ve only had your Apple-financed iPhone 6s for six months, you can get the iPhone 7 if you pay another six months up-front. It’s a shortcut to meeting the requirement of 12 consecutive months of repayment requirement.

Pro Tip: If you choose the upgrade option, you’re required to purchase AppleCare+, which will be rolled into your monthly payments. For an 256GB iPhone 7, your monthly payments in this plan would be $40.75 a month for two years.

AT&T’s iPhone Lease Plan

AT&T’s lease plan is similar to what Apple offers.

The Next Every Year plan operates like the Apple upgrade plan – make 12 payments (either monthly or in a lump) and you can upgrade to the newest iPhone. You’ll have to trade in your old iPhone, and your 12 months of payments will need to equal at least half the retail price of that older phone.

Monthly payments on this plan for a 256 GB iPhone 7 would be $35.38.

Remember, though, you’ll be paying activation and upgrade fees that will cost between $20 and $45, and you’ll be paying a few extra dollars a month for insurance.

Sprint’s iPhone Lease Plan

Sprint’s lease plan is an iPhone-specific lease plan iPhone Forever and is very similar to the T-Mobile lease. You get your phone with 18 months of financing (again, about $36 a month on the 32 GB iPhone 7), and can upgrade after 12 months.

Sprint also throws a hybrid lease plan into the mix. Customers who finance a phone for 24 months can pay an extra $5 a month to upgrade their phone after one year. However, this option isn’t available to customers who went old-school and signed up for a two-year contract and received a phone at a discounted price.

Verizon’s iPhone Lease Plan

Verizon has something called a Device Payment Program. There’s not much advertised about it on their website, so it can be hard to find. But once you do get the information like we did, you’ll realize it’s the same lease offered by the other carriers.

If you walk into a Verizon location to buy an iPhone 7, they’ll start you on a 24-month payment program like Apple will. Next year, if you want to upgrade, you’ll trade in your iPhone 7 for the newest model and you’ll start on a new 24-month payment program for the new phone.

A Quick Word About iPhone Trade-Ins

When a new iPhone comes out, mobile companies push their trade-in programs. In fact, Verizon is saying you can get a “free” iPhone by trading in your old iPhone (more on that in a few minutes). But we found that these programs aren’t as helpful as they seem:

  • Your iPhone needs to be paid off, no matter who your carrier is
  • Valuations on your trade-in can be pretty low
  • Verizon has a terrible way of applying your trade-in value
  • You might have to be an existing customer to do a trade-in

That being said, here’s a quick breakdown of what you need to know about each company’s trade-in programs and if we saw red flags during our research.

T-Mobile’s iPhone Trade-In: No Red Flags

Your trade-in value is applied to the purchase of your new phone, but you can only get trade-in value if you’re a T-Mobile customer.

Apple’s iPhone Trade-In: No Red Flags

At the time of our research, Apple was offering an estimated $250 for an iPhone 6 Plus.  If you sign up for their lease plan, that $250 will be credited to the credit card you’re using for your lease payments. Expect that credit to show up 3-5 days after your purchase.

AT&T’s iPhone Trade-In: No Red Flags

Trade-in values are applied directly to your data plan. If your credit is $300, it will be applied to your data plan bill until it runs out.

AT&T doesn’t accept trade-ins from non-customers.

Sprint’s iPhone Trade-In: Red Flag – Low Trade-In Value

Your trade-in value can be applied when you buy your new phone or it can be credited to your monthly bill. Unlike T-Mobile and Sprint, people who aren’t Sprint customers can get trade-in credit.

However, when we spoke with a Sprint rep about trading in an iPhone 6s, we were told the trade-in value would be around $100, which is a fraction of what you could get from a private sale and lower than what Apple is offering.

Verizon’s iPhone Trade-In: Red Flag – Might Be Unfair to Consumers

Verizon splits up your trade-in value over 24 months, so if you get $650 for your iPhone 6s trade-in, you have a $27 credit each month ($650 divided by 24 months).

If you sign up for a lease on a 32 GB iPhone 7, your payments will be $27 a month, so your $27 monthly credit will cancel out the payments. 

So, what happens after a year when you want to upgrade to the newest iPhone…your remaining credit from your first trade-in gets applied to your new lease agreement, right? Nope. You lose your remaining credit ($325) when you sign up for a new lease.

We think this is a pretty shady tactic, especially since their advertising leads you to believe you can get a “free” iPhone with your trade-in.

Pro Tip: If you aren’t happy with the trade-in estimate you get, you probably can command a better price through buy-back programs from Best Buy, Amazon, BuyBackWorld or Gazelle. Also, consider selling the phone on eBay. At the time of our research, the 16 GB iPhone 6s was selling for around $400 on eBay. Craigslist is also a good way to get a decent price for your phone.

Why You Should Think About Avoiding an iPhone Lease Plan

Before these lease programs existed, mobile companies kept your business by making you sign two-year contracts for pricey monthly plans. Over the past few years they changed their tactics; instead of locking you in with a plan-specific contract, they’ve introduced phone leases and payment plans.

This is a great tactic for iPhone users because new phones are pretty much released liked clockwork every September. So, there’s a good chance their iPhone customers will sign up for lease plans so they can upgrade every year.

Remember the example we gave with T-Mobile? If you lease the base iPhone 7 for a year and then upgrade, you’ve just paid the mobile company more than $400 to use a phone for 12 months.

If the lease plans we just talked about don’t seem like a good fit for you, keep reading. We think a 24-month payment plan or a one-time payment could be a possibility for you.

Plans for People Who Don’t Want a New iPhone Every Year

Lease plans that entice you to upgrade every year don’t always make financial sense. They were created to capitalize on our tendency to want the latest and greatest technology. For those who can resist the urge to upgrade every year, non-lease payment plans and one-time payment options are a great choice.

Non-Lease Payment Plans

All the carriers we mentioned before, as well as Apple, offer payment programs between 23 and 30 months. There’s no interest on these payment plans and, at the end of those two years, you own the phone.

Here’s a list of what a 32 GB iPhone 7 ($649) would cost you at Apple and the mobile companies:

  • T-Mobile: $27/month for 24 months
  • Apple: $27/month for 24 months
  • AT&T: $27/month for 24 months or $21/month for 30 months
  • Sprint: $27/month for 24 months
  • Verizon: $28/month for 23 months

Our advice? Stick with your iPhone for two years.

Here’s the great part about the practical side of our recommendation: The longer you hold on to the phone, the more value you get out of it. 

If you can keep the base iPhone 7 for two full years, you’ve paid about $0.88 a day to use your phone (total price of the phone divided by number of days you’ve owned it). If you ditch the phone after one year of $36/month lease payments, you’ve forked over about $1.18 a day – or about 30 percent more just for the ability to upgrade after year.

Paying a One-Time Fee

In addition to the typical 24-month installment plan, you also have the option of paying $199 to Sprint or Verizon for an iPhone 7, but you’ll have to sign a two-year contract to get that price.

The truth is, though, whether you do a two-year payment plan or two-year plan contract, you can’t break your agreement without paying penalties or your remaining balance. To us, that’s even more reason to stick with your phone for the full two years.

Of course, there’s always the option of paying for the phone up front and avoiding all the plans and upgrades.

Summing It All Up: How Should You Pay for Your new iPhone 7

As you’ve probably concluded by now, paying for your iPhone 7 isn’t necessarily a straightforward process. You have to take a moment to think about the kind of person you are.

Leases: Less Value

If you’re an early adopter that absolutely needs the new iPhone as soon as it comes out, lease plans will give you what you want. 

However, it’s important to keep in mind that enrolling in a plan like this to fund your iPhone 7 means you’ll never have full ownership of your phone and you may have to pay for any repairs that are needed when you trade it in next year for the newest iPhone model.

Two-Year Payment Plans: More Value

If you don’t consider yourself the kind of person who lives and dies by the newest technology, you might want to consider doing a non-lease, 24-month payment plan, or even paying for your iPhone up front.

Doing so gives you one huge advantage: You actually get to own your phone, unlike a lease, where you’re basically renting your phone until the next model comes out. And it’s not like, at the end of two years, you’ll be stuck with a clunky phone.

Our experience has taught us that iPhones can easily maintain their performance over the course of two years, and even beyond two years.

Trade-In Programs: Not So Great

Don’t get drawn in by over-hyped trade-in programs, especially from Verizon. Most carriers don’t accept trade-ins from people who aren’t customers, and those who do offer rock-bottom valuations.

If you can, pay off your iPhone before you upgrade and sell it on one of the sites we mentioned earlier. You’ll get a decent chunk of cash you can put toward your new iPhone.

J.R. Duren

J.R. Duren is a personal finance reporter who examines credit cards, credit scores, and various bank products. J.R. is a three-time winner at the Florida Press Club’s Excellence in Journalism contest. He is a member of the Society of Professional Journalists and his insight has been featured on Investopedia, GOBankingRates, H&R Block and Huffington Post.