The cost of upgrading your iPhone every year

The iPhone resale market in Australia is thriving through marketplace sites such as Gumtree & eBay raising the question of whether you should sell your old handset and splurge on Apple’s latest version each year, or hold on to it for a few years until technology changes make it worthwhile to upgrade to the next model.

It’s smarter to buy your phone outright

Many of us lock ourselves into financing plans with the major telcos so we can get our hands on the latest phone for “free”, but there is a smarter way to go about it. Tying yourself to a financing plan means you lose the flexibility to decide how often you upgrade to a new phone and in reality, that latest phone isn’t really “free”. You’re paying the mobile service provider a lot more for that handset over the course of your contract; instead, you can pay less overall and recoup some of your cost by buying  the new phone outright and selling your old one online when you’re ready for an upgrade.

The upgrade sweet spot based on average annual cost

For those of you who like to analyse your purchases to make sure you’re getting the most cost-effective deal, here’s a visual on what the new iPhone 6S will cost you.

Using Gumtree’s new Phone Price Checker can help you determine the  average resale price of iPhones around Australia going back seven years, all the way to the iPhone 3G, though we’ve done the work for you in the chart below. Calculate the net cost of buying the new iPhone 6S by subtracting what you would get for your old phone from the retail price of the new iPhone 6S ($1,079). Spread that net cost over the number of years you’ve owned your old phone and you have an average yearly upgrade cost for the new iPhone 6S. See the graph below for what this would look like:

In looking at the figures above, the yellow bars will show you the average annual cost of the new iPhone 6S based on how old your current model is. So for example, you can sell your old iPhone 4S for about $461 and put that towards a new iPhone 6S. Spreading the difference in cost ($618) over the number of years you’ve owned your old phone (4 years) means the cost of upgrading to a brand spanking new 6S is about $154 per year.

Although upgrading from more recent models is not nearly as cost-effective, there’s no financial benefit to holding on to your very early model, as the sweet spot seems to be around four years.

The bottom line

Going by the numbers, you can choose to be frugal and hold on to your phone for the optimal 3 to 4 years before upgrading, but surprisingly, even if you did upgrade your phone each year, it would only cost you another $150. When you think about it, that’s only an extra $12.50 a month; no lock-in contract will ever match that. With rapid changes in technology each year, the best approach is to upgrade your phone every 2 years, and not lock yourself into an expensive contract.