Other A quick financial model. What's your calculus for when to upgrade?

[beastly_beast]

Upgrading from a 11 Pro to a 15 Pro and was wondering what it would have costed me to upgrade sooner. Here's the model I came up with.

Assumptions:

• Not using an overpriced carrier like Verizon where they subsidize phone cost with pricy plans (using Verizon MVNO instead for $30/mo voice + data)
• Similar storage capacity for my needs (256gb)
• 10.5% sales tax but only when I buy (when I resell, the new buyer pays sales tax)
• Selling on a second hand market, not trading in (so a 10% resale fee between Swappa's seller fee and Paypal's fee)
• Gotta buy a new case with each phone
• If I resell after 1 year, the phone is in mint condition
• If I resell after 2+ years, the phone is in good condition
• Prices based on current typical prices on Swappa
• The longer I keep the phone, the greater the chance that it degrades sufficiently to eliminate resale value (5% at 1 year, 50% at 5 years)

The main conclusion I'm drawing from this is that it's not worth it to get an upgrade each year, but skipping a year is pretty reasonable. The benefit of waiting each year after that is relatively minor. The official annual upgrade program is highway robbery.

Curious what your calculus is for when to upgrade or if you have clever ways to get the cost per year down of upgrading.

 

[Cedo_]

I really like the effort you put into this, great stuff!

Personally I view them like cars, as it ages, it's a depreciating asset, unless you have a sealed classic model that can fetch hundreds of thousands, it's just a personal decision if you want to upgrade or not. I budget every year for a new iPhone, and after selling my current phone it's only a few hundred bucks out of pocket, which isn't too much. I have no practical rhyme or reason, I just want the latest colors and features, no matter how minimal or large.

Apple trade in values are disappointing, so usually I use Swappa or my friends.

 

[KhunJay]

I use a simple model...I will use a given model for 5 years and then upgrade.
That's when performance starts to dip a little with my usage.
My IPX purchased in 2018 is up for replacement now.
It still works fine but ever since I upgraded the OS from 12 to 15, the battery
has just gone to ****.

 

[LIVEFRMNYC]

I went from an 11PM to a 14PM to a 15PM. I guess I'm good. 😅

 

[Carlsberg69]

You’ve put in some thought into this!! I tend to think of phones like computers, they should at least go for min 3 years.

In all friendliness I would like to throw in some quick input. I think your conclusions are correct for your given model, but I’m not sure it can be kept that simple and imho it should be some more parameters in there. E.g. how does it look like if your demand of memory actually goes up gradually, which is most likely for most people I think, would it point more to a 3 year cycle then? What about environmental and sustainable factors, like we can’t all just have phones for 2 years… yes, you pass it on to the 2nd hand market but it’s not sustainable, and we should not just think about our selfs and argue for how often we can buy new phones. How about we try to argue for and demand to have phones for at least 5 years, looking at you @KhunJay, and fight for the greater good? Just my 2 cents.

 

[TotalMacMove]

Every three years and I get a $800 carrier trade in credit for my old phone. Ends up costing me about $200 for a new phone

 

[coffeeplease]

I end up keeping my old iPhones as a spare, so I don't take into account resale value. My math is simple, full cost of device divided by number of years. One way to effectively lower the cost of a new device is by opening a new credit card and getting the welcome bonus. This is easily shaves $200+ off.

In agreement with you about overpriced phone plans, which I think a majority of consumers are unaware of. All of the big carriers that give you the phone for "free" with monthly credits are just subsidizing it by overcharging you for their $60+ plans. If you do the math of buying outright and using an unsubsidized plan (easily $30/month) versus free with a subsidized plan, buying outright is cheaper most of the time.

My 11 Pro is 4 years old but still going strong, so I am likely to keep it for another year. Battery life isn't much worse than when it was new, but nothing a portable battery can't solve.

 

[eyoungren]

The only calculus I do is this…I ask myself, "Me, do I want the new iPhone?"

If the answer is yes, I get. If the answer is 'meh' or no, I don't.

PS, trade in/resale value is not a thing for me. On my desk right now is every phone I've used since 2009, plus three I did not.

 

[eyoungren]

In agreement with you about overpriced phone plans, which I think a majority of consumers are unaware of. All of the big carriers that give you the phone for "free" with monthly credits are just subsidizing it by overcharging you for their $60+ plans. If you do the math of buying outright and using an unsubsidized plan (easily $30/month) versus free with a subsidized plan, buying outright is cheaper most of the time.

I agree with you on this. Over on the T-Mobile subreddit on Reddit there has been a lot of people up in arms about T-Mobile phone 'deals'. These people chase deals and promos and are willing to shift plans at any time to get them.

I'm not. So, I'm sitting on an eight year old plan that has me paying $150 less a month than what being on the current plans would cost me.

 

[Momof2.1107]

I upgrade yearly, and I either trade in my device to Apple or sell it. I also save up $66.66 biweekly for the next iPhone. With trading or selling in my iPhone, I usually get back $650-$820, depending on where I trade in or sell. I end up paying about $750 for the year.

 

[coffeeplease]

I agree with you on this. Over on the T-Mobile subreddit on Reddit there has been a lot of people up in arms about T-Mobile phone 'deals'. These people chase deals and promos and are willing to shift plans at any time to get them.

I'm not. So, I'm sitting on an eight year old plan that has me paying $150 less a month than what being on the current plans would cost me.

It's crazy, the math doesn't work out. Likely a portion of these buyers can't or won't pay the upfront cost, so they'll happily pay monthly, even if it costs more in the long run. Basically financing the phone at non 0% APR.

 

[KaliYoni]

The main conclusion I'm drawing from this is that it's not worth it to get an upgrade each year, but skipping a year is pretty reasonable. The benefit of waiting each year after that is relatively minor. The official annual upgrade program is highway robbery.

Curious what your calculus is for when to upgrade

Just a quick technical suggestion if you're into building models: if you want to make your model closer to what financial professionals would produce, you should discount the cash flows using whatever discount rate (interest rate) you feel is most appropriate to take the time value of money and opportunity costs into account and, next, make the final output of your model the net present value (NPV) of each scenario.

 

[thecautioners]

I’m fairly poor and can only afford to upgrade via T-Mobile with their jump on demand offering, which allows me to upgrade after 50% of the phone is paid off via my monthly bill. I used to not do it but now I want to upgrade yearly because I like new toys. I’m trading in my half paid off 14PM, and my 15PM cost me $90 out of pocket which is still a lot of money to me. I could never upgrade at full price because at no time do I even have $1200 let alone $1200 to spend on a phone.

 

[Allen_Wentz]

Upgrading from a 11 Pro to a 15 Pro and was wondering what it would have costed me to upgrade sooner. Here's the model I came up with.

Assumptions:

• Not using an overpriced carrier like Verizon where they subsidize phone cost with pricy plans (using Verizon MVNO instead for $30/mo voice + data)
• Similar storage capacity for my needs (256gb)
• 10.5% sales tax but only when I buy (when I resell, the new buyer pays sales tax)
• Selling on a second hand market, not trading in (so a 10% resale fee between Swappa's seller fee and Paypal's fee)
• Gotta buy a new case with each phone
• If I resell after 1 year, the phone is in mint condition
• If I resell after 2+ years, the phone is in good condition
• Prices based on current typical prices on Swappa
• The longer I keep the phone, the greater the chance that it degrades sufficiently to eliminate resale value (5% at 1 year, 50% at 5 years)

View attachment 2266220

The main conclusion I'm drawing from this is that it's not worth it to get an upgrade each year, but skipping a year is pretty reasonable. The benefit of waiting each year after that is relatively minor. The official annual upgrade program is highway robbery.

Curious what your calculus is for when to upgrade or if you have clever ways to get the cost per year down of upgrading.

Since I bill my time, and only have x amount of analyzing energy in me each week, my analysis is that spending more than a few minutes on analysis would make the phone way too costly at billable rate.

Basically I see it marginally costing ~$1 to $1.50 per day to stay current on the top iPhone. The added competence of newer phones is easily worth more than $2/day to me. YMMV. I pay cash, and only when the biz account can handle it so interest rates are moot.

 

[Rainshadow]

I’m a bit confused about the non subsidized cell plans people talk about. At least in my neck of the woods, we have set plans if you want unlimited data which I require. Whether there is a phone attached or not. The only way you avoid that is by going with mint, visible etc. and there are costs with that as well. So, if my att phone plan is $65 with or without the $800 trade-in, I’ll take the nearly-free phone. I’d be lucky to get $250 selling it on the market.

Don’t get me wrong. Nothing is free. I know this, but they make money by folks breaking, losing or upgrading their phones before the bill credits time out. Happens a lot. I stay all 3 years. Never change providers anyway. I can’t. Only one provides service at my house. Don’t see the downside in that. 2 phones over 4 years and I’ve spent $200 total before niceties like cases or AppleCare.

 

[dictoresno]

My calculus is usually based upon desire, lack of responsibility, stupidity, alcohol influence and the fact once I fixate on something, I need to do it even if it’s not the most financially responsible choice.

I upgraded to a 15 Pro for frankly no reason 🤣

 

[Isamilis]

My calculus is usually based upon desire, lack of responsibility, stupidity, alcohol influence and the fact once I fixate on something, I need to do it even if it’s not the most financially responsible choice.

I upgraded to a 15 Pro for frankly no reason 🤣

Ha..ha.. it’s the most honest “justification”, lol

 

[Torty]

Don’t sell my old but instead I use it as backup. So my monetary value goes to zero here.
I get a new one when I need one e.g. it’s not working anymore as it should.

 

[Lionel Messi]

Normally 2 year upgrades. Even then it feels quite soon but I like having newer features. Always pay in full and don’t care for justifying the cost since I use my iPhone quite a lot.

 

[melliflu]

Nice table. Costs can be cut in half by buying one-year old phones in mint condition on second market (no sales tax, at least 30% off) and resell after 2 years before failure risks increase. But this requires some experience / patience / luck for buying safely on second markets.

 

[NdTonks]

Yup its all about the resale value for me. since I buy my phones outright, I am trading in for typically over 1/2 the value of a new phone which has been working great for me and not locking me into any carriers plan for excessive periods of time, so am saving money on that side as well.

And as for resale, I don't ever bother with used market places or meeting people to sell...its not worth the headaches or risks. Decluttr...buybackboss etc...all been solid for me and no issues + saves any safety or fraud claims you may have selling to someone online or in person.

 

[LambdaTheImpossible]

Dead simple here

(capital_cost + applecare_cost - resale_value) / 24 = monthly_phone_tco

monthly_phone_tco + sim_cost = monthly_tco

My monthly_tco for a 13 pro is about £37 which is a negligible cost compared to my income after tax. Resale is done via eBay with strict buyer criteria set up and sold on a low fees promotion day only.

Rules for lowest TCO

1. Pay up front every two years for a new one.
2. Do not get the lowest model as they are more common and do not retain value as well.
3. Do not get a carrier contract at the same time.
4. Use AppleCare to mitigate all ownership risks then let them be someone else's problem.
5. Look after it to retain resale value.

 

[sack_peak]

If I can amortize my device to what is optimal for tax reasons then I'd do that. Buying power of month 1 is much lower than month 48.

Paying cash up front is heavy on the cash flow. Rather do something that is aerodynamic for taxes.

 

[boltjames]

I used to be in a new iPhone every 2 years as that was the carrier model.

Now, since the iPhone X, I go every 3 years because Apple doesn't do enough with new features to make it worth my time to upgrade any earlier. iPhone 12 camera is great, speed is great, screen is great, it's not buggy, I could keep it another year or two before the battery starts to fade.

The only reason I'm getting a 15 is because the 12 has a $830 trade in value making the new phone only $2.17 per month. I know that next year the 12 will be worth half that, so I can't really go further than 3 years before the math swings the other way.

 

[WarmWinterHat]

I upgrade when my phone loses support, or I decide I want a new phone. I don't trade-in or sell my old phone (usually pass it along or recycle it if it's old/dead), so the financials don't matter.

My 13 pro should last a long time.