

New iphone costs $27.94 more than the old iphone - jarnold

Okay, we all know that the new iphone price is just a marketing ploy to get people in more expensive contracts. But how much more will it cost you. Assuming a 5% opportunity cost for your cash.<p>New iphone w/ $69.99 plan:
($1,794.34) =PV(5%/12, 24, 69.99) - 199<p>Old iphone w/ 59.99 plan:
($1,766.41) =PV(5%/12, 24, 59.99) - 399<p>The new, $199 iphone costs $27.94 more than the $399 old iphone when you consider the monthly plan and time value of money.
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arn
And you are getting 3G and GPS.

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mechanical_fish
Yes, and if you really would rather have the money eBay is about to become
well stocked with alternative, slightly-used iPhones for you at _really_ good
values.

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m0nty
"The 8GB 3G iPhone will cost just £99 on a new £30 per month tariff and the
existing £35 per month tariff. Consumers choosing either the £45 or £75 per
month tariffs will get the 8GB 3G iPhone for free."

That's much better than the previous offering. I was looking at the £35 per
month tariff with iPhone v1, but the ~£300 price tag put me off. So now I can
get the same tariff and a reduced up-front cost -- what's not to like?

[http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/...](http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/10/bcnapple210.xml)

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maxklein
What is the 5%? Why do you not just do $10 * 12 months?

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jarnold
A dollar today is worth more than a dollar tomorrow. (You can buy something
else, invest it, etc.) All things being equal, it's better to defer payments
rather than all at once.

People are carping that the new iphone might be $200 cheaper, but then you
have to pay $10 * 24months = $240 more in monthly payments. (Difference of $40
dollars more for the new iphone.)

The math is wrong, you have to discount future payments. I choose 5% as a
conservative interest rate.

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maxklein
I'm sorry, but I still don't get it. This concept is totally strange to me.
How is a dollar today worth more than a dollar tommorrow?

How is it better to defer payments (add debt) than to pay everything at once?
If I pay now, I can bulk up on money quickly later without having it reduced
by debt repayment.

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DougBTX
> How is a dollar today worth more than a dollar tomorrow?

Inflation, among other things. Deferring payments might add debt, but you've
got to include the price of the debt: the interest rate.

Imagine you have $100 in the bank, earning interest. Lets say, if you keep it
in your account for a year, you end up with $110. So, if someone gives you the
option of paying $100 now, or paying $100 at the end of the year, which do you
pick? If you pick now, you'll end up with $0 in your account. If you pick at
the end of the year, you'll be left with $10.

Back to your question, normally when you add debt, that debt has interest
payments attached to it. So the choice isn't "$100 now or $100 later", but
"$100 now or $150 later". Imagine you still have your $100 in the same
account, now the choice is to have a balance of $0 now, or -$40 at the end of
the year, so it's better to pay now.

Whether you are in the first or the second situation depends on the relative
profits from keeping your money invested (ie, via the bank) and the cost of
the interest on your debt. For the iPhone, your monthly payments stay the
same, so it's more like the first example than the second example, except that
the new monthly payments are higher than for the old iPhone, so you still
"loose".

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davidmathers
Shouldn't e be in that formula somewhere?

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ivank
Don't forget that 16GB is $299.

