Other commenters here have made excellent points.
For what it's worth:
The IUP takes the cost of the phone + AppleCare and divides it into 24 equal monthly payments, with the first one due on the date of purchase.
If being economical is your goal, use your phone for at least 23 months, after which time it will be paid off and yours to keep. A phone that cost $1000 at time of purchase will probably have a resale value of $300 or $400 after two years, which is money you can apply to your next phone purchase if you like.
If you upgrade after one year on the IUP, it *feels like* it doesn't cost anything because the monthly payment on your new phone will likely be the same or very similar to what it was on the phone you bought last year and have just traded in (unless you upgraded to a phone with a significantly higher sticker price).
But of course, it does cost something. The cost of upgrading after just 1 year is the resale value that you would have had if you'd kept the phone for the full two years and then sold it. If this resale value is $400, it averages to $200 per year, so you lost $200 by upgrading after just one year.
Of course, if the new phone has features that are really valuable to you, then it might be worth it. But at least you can make a more informed decision taking account of the true costs of annual upgrades on the IUP.
--
One other thing about the IUP that I just learned.
If you want out of the program after one year, you have two options:
1) You can pay off the 12 remaining payments (which you probably already knew)
2) You can exercise your trade-in for a new iPhone, give back the old iPhone, then return the new iPhone within the 14-day return window. When you turn in your old iPhone, Apple closes the loan on it. When you return the new iPhone, the loan on that one is closed, too. Congratulations, you're fully out of the program. (This is in the IUP "terms and conditions.")
Which of these options is better? If the resale value of your phone (on eBay, for example) is higher than the sum of the remaining payments, then option 1 is better - as long as you don't mind the hassle of selling your phone on eBay. If the resale value of your phone is less than the sum of the remaining payments, then option 2 is better.
