Crunching the numbers: Should you buy or lease your next iPhone?

Apple Unveils New Versions Of iPhone 6, Apple TV
Apple Senior Vice President of Worldwide Marketing Phil Schiller speaks about the new iPhone 6s and 6s Plus during a Special Event at Bill Graham Civic Auditorium September 9, 2015 in San Francisco, California.
Photograph by Stephen Lam — Getty Images

For many car buyers, the biggest decision isn’t what make and model to get, but whether to lease or buy.

iPhone shoppers now face that same dilemma. As part of its new product launch, Apple (AAPL) introduced its first-ever iPhone Upgrade Program, a monthly payment plan that includes an annual phone upgrade option and extended AppleCare warranty. In other words, a lease deal.

How does this compare with, say, a traditional two-year contract, or even buying the phone outright? To answer that, it’s going to take some math.

Like most of its predecessors, the new iPhone 6s starts at $199 with a two-year contract; the iPhone 6s Plus, at $299. Those are subsidized prices: In exchange for paying less up front for the phone itself, you agree to stick with the same carrier for 24 months.

You can also buy an unlocked iPhone 6s (starting at about $649 and $749, respectively), then take it to the carrier of your choice and choose a no-contract plan. Although that means a much higher up-front cost, it opens the door to a wider variety of carriers, many which cheaper service plans than the Big Four.

Finally, there’s the new Apple plan, which starts at $32.41 per month for the iPhone 6s and $36.58 for the 6s Plus. It’s a two-year financing plan, but not a service plan: You’re paying just for the phone; you’ll still need to hook up with a carrier and purchase service separately. Also, if you take advantage of Apple’s upgrade option after one year, your financing plan resets, meaning you’ll be on the hook for another two-year lease.

Now for the math. This is based on the entry-level option, the iPhone 6s with 16GB, (although you should at least spring for the 64GB model) and includes only a sample of current plans on the market. You can easily extrapolate as needed: the 64GB and 128GB models add $100 and $200 to each equation, while the 6s Plus adds an additional $100. This breakdown is also based on a single user; the numbers, especially with regards to service, will vary if you’re looking at multiple phones and family plans.

TWO-YEAR CONTRACT This is pretty straightforward, and also pretty familiar: You pay $199 up front (again, that’s for an iPhone 6s with 16GB), then a minimum of $45 per month according to Apple’s plan-comparison tool depending on carrier. Taking into account the plan’s 24 months, the total cost is approximately $1,279.

BUY THE PHONE As noted above, $649 buys you the entry-level iPhone 6s. Now you just need service, and buying the phone outright lets you purchase service from a wider variety of wireless operators. One option: Cricket Wireless, which offers a basic package for $35 per month (much lower than the big four) if you sign up for auto-pay. That brings your two-year total expenditure to $1,489. Another popular MVNO: Straight Talk, which has unlimited-everything plans starting at $45. Total: $1,729.

APPLE IPHONE UPGRADE PROGRAM At $32.41 for 24 months, the iPhone 6s will cost you a grand total of $777.84. If you go with Cricket Wireless for service, you’ll be out $1,617.84 after two years.

So, is the two-year contract really your best deal? Not necessarily, because the service plan in our example—AT&T’s $45/month option—gives you just 300MB of data, versus 2.5GB from Cricket. Even if you go with T-Mobile at $50/month, you get just 1GB of data. It’s hard to completely level the playing field, but locking yourself into a two-year service agreement usually leaves you with the fewest options.

Okay, but what about locking yourself into a two-year upgrade program? If you’re someone who likes a new phone every year, Apple’s plan has its appeal—especially considering you don’t have to pay anything up front. Plus, it’s a boon for clumsy types, since it includes the AppleCare+ policy, which covers you for up to two accidental-damage incidents (not including a $99-per-incident service fee). If you’re not satisfied with, say, Cricket as your carrier, it’s a simple matter to switch to another one: Straight Talk, Ting, or even back to one of the Big Four.

Needless to say, there are a lot of options for the modern iPhone shopper, and a lot of potential confusion as well. Now that you’ve got the basic math out of the way, hopefully you can make a more informed decision.

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