If you thought that Apple Inc. (NASDAQ:AAPL)’s latest iPhone 6 costs $199 for 16GB, $299 for 64GB and $399 for 128GB, you can’t be more wrong. Apple says on its website that the iPhone 6 pricing begins at $199. But the actual amount you’ll pay on a two-year contract is much higher. These subsidized figures include hidden costs that inflate the price over time.
iPhone 6 doesn’t cost $199
However, Ed Bott of ZDNet notes that average buyers can’t figure out the hidden costs without exhaustive research. That $199 is the upfront cost of the entry-level 16GB iPhone 6. The contract prices include $450 subsidy by telecom operators. Note that carriers are not charity organizations; they make sure that they recover that subsidy, plus some more. Depending on which carrier you choose, you sometimes end up paying hundreds of dollars more than buying an iPhone 6 outright.
The above chart shows the actual price of the iPhone 6 that you pay for the three variants of the iPhone 6 on different U.S. carriers. This chart doesn’t include $30-$40 activation fee, which is waived off in most cases. Carriers divide the full price into equal monthly installments over 20 or 24 months. If you choose to pay the entire sum outright or 20-24 monthly installments on AT&T or Verizon, you qualify for a per-line discount ranging between $10 and $25 per month.
But those discounts disappear when you purchase an iPhone 6 on the “low” 2-year contract price. AT&T’s disclaimer below shows that the discounts disappear. Sprint also plays the tricks, albeit a bit differently. Ed Bott notes that the company gives you $50 Simpy Unlimited Plan if you finance the iPhone 6 at full price or buy it outright. But, on a two-year contract, there are two different plans. They start with $50 charge and further require you to pay $30 a month for unlimited data or $20 for 1GB monthly data. These charges add up over two years.
The difference between iPhone 6 prices
For telecom companies, people choosing to buy the iPhone 6 with a two-year contract are the best customers. For example, those having a shared data plan with 10GB data plan on Verizon pay $100 a month for data and $40 for the on-contract smartphone. But if you choose to forgo the contract and finance the device over 20 months, the smartphone charge comes down to just $15.
That means you pay $200 for a 16GB iPhone 6 upfront and $40 a month for two years ($960 for 24 months). What’s more, Verizon charges another $30 to upgrade your device when the contract ends. So, the total cost of the 16GB iPhone 6 is ($200 + $960 + $30) $1190. Compare it to someone who buys the iPhone on Verizon Edge program. They pay monthly installments that add up to full price of the device ($650). Plus, they pay $15 a month for smartphone access over that two year period, which adds up to $360. That means they pay a total of $1,010, or $180 less than what you paid on a contract.