GoKawiilA Bloomberg report yesterday suggested that Apple is about to launch a new Apple Upgrade leasing contract to replace the iPhone Upgrade Program.
There appear to be two significant differences between the two, and one of those is potentially very worrying …
The iPhone Upgrade Program is a straightforward one. The cost of your purchase is split over 24 months, and at the end of the two-year period, you own the device outright. There is no charge for the credit.
(Additionally, you have the option of upgrading to a new iPhone after 12 months. In that case, a new two-year contract begins, and you are in effect selling the old device back to Apple for the payments you have already made.)
Apple has not yet made any official announcements about a replacement program, so we don’t know for sure how it will work. However, Bloomberg says that it will extend to most other Apple products, with a three-year term for Mac purchases. So far, so good.
But the worrying element is that the report implies it will work in much the same way as a car lease. With this type of contract, you are not paying off the total cost of your purchase over the term of the lease. Instead, your monthly payments only cover the depreciation of the product during the lease period, plus any interest charged. At the end of the lease, you don’t own the product – you have essentially been renting it.
Again, assuming it works in the same way as a car lease, you will either have to return the product at the end of the lease or pay a balloon payment representing the difference between the depreciation and the full cost of the product.
Of course, this means the monthly payments are lower than they would be under the existing scheme.. It can be argued that this is a good thing, as it will make Apple products accessible to a greater number of people.
The concerning aspect, however, is that most people don’t set aside an additional monthly sum in order to be able to make the balloon payment at the end of the lease. The most common occurrence at the end of a car lease is that people return the vehicle and take out a fresh lease on a new one. Essentially, they are trapped into a recurring cycle where they will never own the product.
If the new Apple upgrade program works in the same way, then the same thing will apply. Instead of having the option to hold on to the existing phone for several years, those purchasing in this way will essentially be forced to upgrade every two years for an iPhone or three years for a Mac. Even if there are no interest charges, the total cost of ownership over a lifetime will be significantly higher.
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