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Lease Vs. Buy, iPhone Edition: When To Pay Cash, Lease From A Carrier, Or Upgrade With Apple

It’s no secret---iPhones are expensive. It may be difficult to justify spending that kind of cash on a cell-phone. Apple offers a new lease program similar to phone carriers. Which should you go with?

I don’t know why I’m still so surprised that, when a new iPhone comes out, some fanatics go out and buy it right away.

If the same people bought a brand-new phone over the last three or four generations of iPhones, upgrading like this has cost them well over $2,000. Never mind the fact that their phones probably didn’t even need replacing.

But these are the exact people Apple had in mind when they thought up the iPhone Upgrade Program, intended to allow consumers to lease iPhones and upgrade each year, rather than pay between $600 and $700 upfront. Of course, this is essentially what carriers have done for years by baking the price of phones into their expensive monthly service plans.

If you want to save money, you go out and pay cash for a lightly used or refurbished one- or two-year old iPhone and pair it with a discount mobile carrier that will give you service for half the price of a major carrier. We should leave our advice at that.

But, we realize some of you are going to set aside the cost and buy a new phone anyway because, hey, they’re full of cool new tech that your friends don’t have yet. That’s fine. But what are the pros and cons of buying vs leasing an iPhone? Should you pay for a new iPhone in installments through a wireless carrier or use Apple’s iPhone Upgrade Program? Let’s find out.

Option 1: The iPhone Upgrade Program

Since Apple wants you to buy their phones, but recognizes that not all (dare we say, most?) people can afford their expensive prices, they came up with the iPhone Upgrade Program.

Apple Upgrade Program vs carrier purchase plans

Plenty of wireless carriers offer the same type of plan (and most at a less expensive price), why would you choose Apple’s program?

Well, Apple offers the one thing most carriers don’t: AppleCare. So when you inevitably crack your phone screen as so many of us have, you’re guaranteed up to two years of repairs with Apple’s warranty.

The other major reason most people would choose this plan over Verizon’s or AT&T’s is the fact that you’re eligible for an upgrade every year after you’ve made 12 payments. For the Apple aficionados who need to have the latest product as soon as it comes out, this deal gets you as close to that as possible.

What’s the catch?

When you sign up for the upgrade program, you’re essentially taking out a loan with Citizens Bank. Like any loan, you’ll need to have a decent credit score in order to get approved.

As anyone who’s used an Apple product knows, if you can avoid breaking it, it’ll last a long time. (I’ve had my MacBook Pro for over six years now and it’s still going strong, albeit a little slower). So replacing your phone every year isn’t necessarily a deal that you truly need to utilize.

You could instead opt to get older models at a much lower price through carriers or just pay upfront for older phones.

Carrier purchase plans

At Verizon, AT&T, T&Mobile, U.S. Cellular, and most other phone carriers, you can choose to purchase an iPhone—or any other phone—and pay in installments. Unlike the Apple Upgrade Program, when you purchase a phone from a carrier, you’re paying for the phone over time, but, after you make your last payment, you actually own the phone. The Apple Upgrade Program is a lease. Carrier purchase programs are loans. (Just be careful, as some carriers, like Sprint, are now offering leases, as well).

The lease vs purchase program is an important distinction, because at the end of a purchase program loan you may be able to collect residual value from your phone either by selling it or trading it in. Some other advantages of carrier purchase programs? For one, you can find better deals.

Another benefit is that many carriers allow you to buy pre-owned or refurbished phones for a much lower monthly payment.

Some companies still allow you to get free phone upgrades

Everyone was pretty upset when Verizon and other phone carriers decided to get rid of the free phone upgrade at the end of your two or three-year contract, but there are some companies that may be grandfathered in.

I get my phone through the company my mom works for, where they have a deal with Verizon that still includes free phone upgrades. Although the choices are more limited than they used to be, I was recently able to upgrade my phone from an iPhone 5 to 6s at no additional cost to me. So, if you’re one of the lucky people who gets their phone service through your job, check there for deals on phone savings before you opt for any other option.

Carriers offer deals

Carriers want you to spend the extra money with them, so frequently they offer better deals than the Apple store.

For example, U.S. Cellular offers a deal that allows you to buy an iPhone and get one free when you switch or upgrade your service with them, so does AT&T (if you have the right service plan).

Sprint offers a similar deal, but through their leasing program.

If you bypassed these carriers, you’d end up paying double with the Apple Upgrade Program.

When should you just save up and buy the phone in full?

If you can be content using the same phone for two years or longer, your better off just buying your phones outright. Overtime, lease payments could add up to far more than you would pay for the phone upfront assuming you don’t trade your phone in every year or two. Many people don’t have the money upfront and instead opt for the payment plans, but make no mistake about it, the plans are costing you—not saving you—money.

Yes, it sucks if you break your phone and you own it, but you’ll be stuck paying high repair costs and fees if you’re leasing your phone through a carrier. And the Apple program only guarantees you an upgrade if you return your phone with no damages or scratches.

If you know you’re going to perpetually upgrade to the latest-and-greatest iPhone, cost be damned, a lease option may just be the most convenient way to go.


Whether you choose the Apple Upgrade Program, a carrier’s phone purchase plan, or choose to pay the entire cost upfront, you’ll need to take into consideration your own personal needs.

If you need time to pay off your phone, sticking to a payment plan through your phone carrier often comes with discounts, tends to be cheaper, and gives you more options.

On the other hand, Apple provides their upgrade service because they know people want the newest phone as soon as it hits the market.

About the author

Christopher Murray

Christopher Murray

Christopher is a professional personal finance and sustainability writer who has covered everything from budgeting to unique investing options like SRI and cryptocurrency. His work has appeared on a number of personal finance websites, including Money Under 30 as a former senior editor and staff writer.

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