A lot of people aren’t going to have that $433 at the end of the lease to purchase the device outright, and so will have to roll it into another 2-year monthly payment, and another one after that.
So the goal of the program is the same as every other similar one - they want to turn a one-time device purchase into a perpetual monthly revenue stream, while keeping ownership of the asset at the end.
I think you're looking at this too much from the perspective of someone who wants to own the phone, not as someone who wants to consider a lease.
Leases are not a new invention. A lot of people, including very financially savvy and well off people, choose to lease rather than buy depending on the circumstances.
It preserves optionality. If you get to the end of the lease period and there’s a new iPhone you want or the battery isn’t holding up, you can choose not to buy it. You don’t have to deal with selling it or trading in.
If someone doesn’t have $400 to buy out the residual then I doubt they would have had the cash to pay for the whole thing up front. I don’t understand what your argument is.
> So the goal of the program is the same as every other similar one - they want to turn a one-time device purchase into a perpetual monthly revenue stream, while keeping ownership of the asset at the end.
It’s an option. They’re not turning anything into anything. Anyone who wants to buy the device can buy it. You now also have the option to lease it for 12 or 24 months and then after that you can still buy it if you want. Or you can not buy it.
It’s options. You don’t have to use it.
That’s the entire point. They would have bought a cheaper phone, or held on to their old one, but are now paying perpetual monthly payments.
There’s a reason car dealerships never ask “how much can you afford”, but “how much do you want to pay every month”.
There’s a reason Klarna is running the program for them.
You seem tilted at Apple for offering a financing option, but your real gripe is apparently with some people who have poor financial decision making skills. Those people could (and probably would) do a lot worse with traditional options like a credit card.
average credit card interest rate: 18-25% APR [0][1] average klarna effective interest rate:25-33% APR [2]
getting what are effectively individual lines of credit per-burrito or iphone is crazy work and I wouldn't recommend it most of the time. Save some money up, people!
[0] https://www.experian.com/blogs/ask-experian/research/current... [1] https://www.forbes.com/advisor/credit-cards/average-credit-c... [2] https://wealthvieu.com/debt/credit-card-debt/klarna-review/
> getting what are effectively individual lines of credit per-burrito or iphone is crazy work and I wouldn't recommend it most of the time.
I think this whole sub-thread has gone off track from people who aren't reading the actual terms of the Apple deal.
Nobody's talking about getting a 33% Klarna loan for an iPhone or burrito. You included 2 statistics and 3 citations that have nothing to do with the program we're talking about.
We're trying to talk about the Apple program in the link, not some other financial services complaints that people have about other things.
most people live on credit cards as bridge finance between paychecks. when I mean most people - I mean 50% of the population.
- written on my S10
That's not really applicable because:
1. the study is for an "unexpected" expense. This you can see from 2 years away
2. The wording in the study was something along the lines of "would have to dip into savings", not that they literally don't have any money for it. The fed's survey of consumer finances shows the median household has between 7-13k (depending whether you're counting median income or median wealth) in their checking accounts
https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...
Should people be more financially responsible? Yes
Are they today? No
In a rational world payday loans, predatory auto loans, BNPL, perpetually rolling credit card debt etc would not need to exist. Yet these sectors are rapidly growing and companies in it are thriving.
I'm saying the specific claim of "most people live on credit cards as bridge finance between paychecks. when I mean most people - I mean 50% of the population" is false.
But they're not actually interest in owning 2 year old phones though right?
They're just interest in you / 2ndary market not owning any?
They’re not putting it back into a box, listing it for sale, and pocketing the difference.
I'd imagine even a phone they can't fix to sell still has some value, even as scrap to them especially as the costs of every damn material that goes into any electronic device continue to soar.
And that all being said: two things can be simultaneously true at once. Leasing is a perfectly valid form of... well you can't really say ownership, acquiring goods I guess? And it also does mean Apple can now turn what may have been one-shot purchases into people who are just fine paying a monthly payment ad infinitum. And that, in turn, opens the door for keeping people on a perpetual new-phone treadmill of monthly payments that involve them never actually owning anything.
You can very easily tie this into the Samuel Vimes Boots Theory of Economics:
The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
They’re obviously making money on the whole purchase and program because they’re a business, not a charity.
The assumption that they’re making significantly more money on this than direct sales may or may not hold. It could be that they’re targeting a similar level of end-to-end profit as direct sales but using this to expand their market by providing more purchasing options.
Some people get angry at the prospect of a company making money, but they’re not charities. Everyone should do the math and decide which purchase options work for them. What works for you may not be appropriate to force on to the rest of the population.
One month of median US rent buys three 55" TVs.
The math has changed.
The other thing to consider, that while Apple might sell you the phone for $400 or whatever, they might re-sell it as refurbished for $700.
If someone can’t plan ahead 2 years for a $433 expense, they definitely should not have a top of the line iPhone. When my income was low I had an iPhone SE that cost $329.
You literally don’t own the hardware, it’s a lease.
That said, you can purchase with financing with an Apple Card, or with numerous other financing options like carrier financing. However, leasing allows the purchase prices of phones to continue climbing while still presenting a palatable monthly payment.
I think what’s going to happen with this is a lot of people will be lured in with low payments and then be surprised with the ending “keep your phone” payment, where it will feel like it makes more sense to just get the new phone and continue the same payments.
Paying a $400 payment on a 2 year iPhone will look insane as that’s the depreciated value of a 2 year old phone.
Check ebay. That's around the price of a pro series iPhone 2 years old.
Is a 3 year upgrade cycle for a MacBook Pro unreasonable? Would you get a lower spec machine since you were not trying to maximize the life of the machine? I know I always tend to overspec my machine to keep it for as long as possible.
My M3 MBP with 36GB of ram (looks like it was about 2500 3 years ago) would get me $945 in trade in credit. May be able to get more on eBay but I can't argue with just doing trade in is easier. A bit less than I would "save" by just upgrading at the end of the lease and this already is not the base model so the number does shift.
Especially when I look at the payment options right now I could finance that MBP about $250 on my Apple Card for 12 months no interest, or $57.99 for 36 months. and then I get a new one.
Would probably depend on what it is I was doing with the machine, am I doing tasks that would actually benefit from better and better machines like video editing and similar tasks or am I just using my computer fairly basic in a way that even an M1 machine still handles just fine.
For a personal machine? Yes that’s something I see as unreasonable, MacBook Pros have a very long lifespan. M1 laptop are still pretty awesome machines. For a business an upgrade every 3 years could make sense
Is that threshold for using a Pro machine 3 years, I don't know probably not for most people. My M3 Pro from almost 3 years ago is still running beautifully. I could make the argument that more power would benefit what I do with this machine without a doubt, is it worth the upgrade? I don't know, but I would be lying if I have not been thinking about it.
But I also think about the mentality I had when I bought this machine, and the mentality I had when I was looking at possible upgrades just a few weeks ago. Possibly paying more to overspec the machine compared to my current use case assuming that I want to continue to use it in 3 to 4 years.
I don't know if that calculation is necessary as cut as dry.
This is probably the case for a lot of people, but Apple is smart with their lineup and there are several what I'd call "not pro" features that are gated by the MBP (and iPad pro) which is unfortunate.
Primarily, 120hz screen, SD card reader, HDMI port. None of those are really "pro" featuers, they're just basics I'd expect on any premium laptop.
That being said, 3 years is a tad on the aggressive side for an upgrade cycle for a laptop. I just upgraded my M1 last year, and this M4 Pro will easily last a year or two longer before I feel a compelling need to upgrade, outside of getting RAM constrained. Use case is photo+video production. So for me, a 5 year cycle would be about right.
But also depends on how you spec it out. If you are just buying the base model, then 3 years makes sense. If you spend extra to max it out, you'll be able to hold onto it for 6+ years.
That's precisely why they set it up this way, honestly leasing always made more sense for businesses. I prefer to keep my phones, peace of mind knowing, if I lose something that somehow did not make it to the backups, I can just turn on my old phone and find it.
Considering the cost of a battery replacement, it's not the worst value proposition in the world.
Apple will benefit in two ways. They will make 125% of what they used to make on every phone they sold because they can sell it twice and more people will be forced into the two year upgrade cycle (because they can’t afford the buyout at the end) increasing their overall sales numbers in general. If you’re a consumer, you should just treat this as a 24 month interest free loan and then buy the phone outright at the end of that period. If you put the outright cost of the phone into a bond (say 7.5%) during that period, you will even get 3 months payment free and only pay for 21 out of those 24 months.