When Apple shipped the new iPhone, it lowered the price. But what does an iPhone really cost? How about $38,000? Or would you believe over $200,000? Let’s explore the true costs of the iPhone.
When Apple launched the iPhone, it lowered the price to $199 for an 8GB model and $299 for the 16GB model. Of course, Apple and ATT giveth, and Apple and ATT taketh away. At the same time they lowered the base price of the iPhone, the cost of a service plan for the iPhone went up by $10 a month, increasing the total cost of ownership.
But what if you sat out the iPhone completely? Just how much money would you have if you didn’t buy an iPhone at all?
Well, the answer depends on a couple of factors. Just straight up, if you added together the price of a 16 GB iPhone, the cost of activation, and the cost of a two-year data plan (with the optional unlimted texting) you’d wind up paying $3,934.76. That’s the cost of about 2 MacBook Airs.
Where it gets interesting is if you took that same $3,934.76 and, rather than paying Apple and ATT, you invested that money. Even though the stock market isn’t the best place to be right now, let’s assume you took the money and invested it in an S&P 500 Index Fund. The rate of return there for the past 5 years has been 7.58%. If you didn’t add to the lump sum and just let it grow for 30 years, you’d wind up with $37,966.25.
Going one step further, what happens if you take the cost of Apple and ATT’s data and texting plan and paid yourself by investing that amount monthly rather than giving the money to them? The combined cost of an unlimited voice/data/texting plan for the iPhone is $149.99 a month. If you invested that money every month for 30 years at the same 7.58% rate, you’d have $205, 370.14 in the bank.
So, in either case, as you can see over time a $299 iPhone can wind up costing you a lot of money.
What’s the alternative?
Of course, you’re not getting nothing for the future $38,000 that the iPhone is costing you. You have the flexibility to talk, text, and access the Internet from pretty much any place in the country and wherever 3G service is available. You pay for quite a bit of freedom of movement and access to data and people.
One alternative is to just stick with the basic cell phone service you have for flexible voice access and a laptop and the nearly ubiquitous free WiFi services that are available. It’s a little less convenient, but you can save some money in the long term.
If you already have a SmartPhone or Blackberry with data service, the savings aren’t as clear. Even so, comparing the costs of the data plans and what you’re actually getting by migrating to the iPhone can be an interesting mental task. It might be tempting to dump that ancient BlackBerry for a shiny new iPhone, but if you’re not getting that much in return, why bother?
The bottom line for IT leaders
When any sexy new device comes out, it’s tempting to just jump at it. This is especially true when a vendor does a bait and switch, lowering the cost of entry but hiding an overall price increase under service fees or something like that. Take a look at the total cost of the device. And if need be, run the numbers to see just how much money you’re losing in the long run by comparing the cost to what you’d have in the long run by investing the same amount of money.