You can now pre-order the iPhone 13—here’s how to tell if Apple’s upgrade program is worth it

Apple iPhone launch day is here, which means that millions of people are upgrading to the new iPhone 13. If that’s you, you have a multitude of options for buying it, including the iPhone upgrade program, which starts at less than $40 per month.

First introduced in 2015, the upgrade program allows customers to pay for their iPhones in 24 monthly installments. For this year’s iPhone lineup, that means the $699 iPhone 13 Mini with Apple Care coverage starts at $35.33 per month, while the larger $799 iPhone 13 starts at $39.50. The flagship iPhone 13 Pro starts at $49.91 per month and the larger iPhone 13 Pro Max starts at $54.08.

After making 12 payments, customers can either keep making payments until they own the phone outright or give their “old” phone back to Apple in exchange for the latest model. Once they do that, the 24-month payment period starts all over again.

Part of the reason Apple introduced the program was because it found itself with a massive customer base that was happy to keep their existing iPhones for several years, limiting the number of people who would buy a new phone each year. With the upgrade plan, which greatly reduces the financial barrier to entry, Apple hoped to lower the sticker shock of getting the latest phone.

“It begins to look like more of the traditional way of getting it through the carrier,” Apple CEO Tim Cook told CNBC in 2019. “So you wind up getting an incredible new phone that’s so much better than what you had for $20, $30 a month or so.”

Here’s how to decide whether the upgrade program is right for you.

On top of giving you a top-of-the-line iPhone every year, the main draw of Apple’s installment plan is its affordability. Though you are still paying off the full cost of the phone over the life of the contract, there is no triple-digit charge hitting your wallet all at once.

The program also offers a lot of convenience, with Apple making the return process easy by sending you a box and shipping label to return your old iPhone in. The retailer can also take it off your hands at an Apple Store.

Apple will accept the iPhone even if it has regular wear and tear, provided that it is still in working order. Considering that the condition of a phone has a large impact on its resale value, Apple’s plan may be appealing to those people who are prone to dropping their devices or who don’t like to keep their phones in cases.

And with Apple Care+ insurance — which includes hardware coverage and accident protection — factored into the pricing as a smaller monthly installment rather than as one lump sum that be as much as $199, you can lay out much less cash at once and still make sure you’re protected.

The main drawback to the upgrade program is that until you make all 24 payments, you don’t own your iPhone. That means you can’t resell it, give it away or do anything to it that would otherwise impact Apple’s ability to one day sell it to another customer.

Your iPhone’s resale value may be higher than 50% of the phone’s price tag, particularly if you’ve taken good care of your device. If that’s the case for you, when you trade it in for a newer model after paying half of it off, you’re losing out on the additional resale value.

While amount you can save ranges from model to model and the condition your phone is in, the difference between doing the upgrade plan trade-in and reselling your phone yourself could be as much as $75 or $100.

When asked to comment on what type of consumer the upgrade plan is best for, an Apple spokesperson directed CNBC Make It to the company’s press release on iPhone pre-orders.

The plan is also designed to keep you in Apple’s ecosystem, which the company is constantly monetizing in the form of a growing number of subscription services including Apple TV+, Apple Music and Apple News+. By committing to iPhone long-term, you may be setting yourself up to spend more money with Apple moving forward.

“Ninety-seven percent of Apple customers, once they’re on an iPhone, stay on an iPhone,” Wedbush Securities analyst Dan Ives tells CNBC Make It. “This is all about Apple looking to get further entrenched into the consumer spending ecosystem.”

You don’t have to buy your phone directly through Apple. The major American carriers all have their own versions of an upgrade plan. While they are largely similar to Apple’s plan, they don’t offer Apple Care+ coverage.

Here’s a look at a few versions from popular carriers.

• AT&T: The carrier’s installment plan has 36 monthly payments instead of 24, and like Apple, allows customers to upgrade once 50% of the device cost has been paid. AT&T charges a $5 monthly fee on top of the cost of the phone in exchange for the ability to upgrade.
• Verizon: Verizon’s plan requires customers to pay 50% of the iPhone’s cost before upgrading.
• T-Mobile: Customers who want the latest iPhones are offered 18-month contracts to pay off their phones and are required to make a down payment when they receive their device. The payment ranges from $100 to $150, depending on the model you select.