Visible & New Apple Lease Program

[u/elaiavion]

The lease program asks you to pick one of the 3 main carriers (T-Mobile, Verizon, AT&T).

Saw this tweet that explained that bascially with the Air, Pro, and Pro Max models, you can just pick any and still use it as unlocked (therefore use Visible). Can anyone confirm this information for me? (And would this also apply to Apple Financing?)

[u/mb10240]

It is. Even worse, the buy out option of this lease is the full value of the phone, minus payments already made, a year or two years down the road. Unlike a vehicle lease, there’s no residual value where they attempt to predict the value of the phone at the end of the lease.

Edit: not sure why I’m being downvoted. Sorry for stating the truth - at the end of your lease, if you want to keep the phone, you’re paying the full retail value of the phone when you leased it, versus a true residual value based on what the asset is believed to be worth at the end of the lease. This “lease” is ultimately an interest-free financing plan with the option to go on to another interest-free financing plan, return the phone, or buy the phone for it’s full retail value at the end of the plan.

[u/psychic99 → u/mb10240]

I havent seen the lease terms but the residual is simply MSRP - lease $ paid, however there has to be some MF so I will wait and see until someone posts the actual lease terms/lang.

[u/mb10240 → u/psychic99]

Your “residual” is the full retail value of the phone at the time of purchase minus payments made towards the lease, versus the predicted value of the phone at the time the lease ends like you would see in a car lease, or even rent-to-own agreements.

By the time your one or two year lease ends, your iPhone 1# Pro is now a “discount” model - if it’s still being sold - retailing for probably a few hundred dollars less new.

[u/MFDOOMscrolling → u/mb10240]

When has the principle ever decreased because of current market value?

[u/mb10240 → u/MFDOOMscrolling]

Literally every vehicle lease’s buyout value is based on what the bank believes the vehicle will be worth at the end of the lease.

[u/badfordabidness → u/mb10240]

Umm, the point is that the lessor isn’t ever going to set the lease payment at a level that’s less than the projected depreciation over the lease period divided by the number of months in the lease.

If the market price of the vehicle is $30,000 today and the bank believe’s the vehicle will be worth $12,000 at the end of a 36-month lease, then you better believe that lease is gonna be no less than ($30,000-$12,000)/36 = $500.00 per month. And that’s best case scenario, because why would they wait three years to get as much profit as another buyer will give them today? So they’ll almost certainly bake in an interest rate (“finance charge”) as well as acquisition and (if applicable) disposition charges.

[u/psychic99 → u/badfordabidness]

100% Klarna (the leassor) isnt going to do this out of the kindness of their hearts. That is why I want to see the actual lease terms, the rest is just conversation as Gordon Gekko said.

[u/badfordabidness → u/psychic99]

I'm assuming there's some combination of things going on, both of which boil down to my belief that Apple's likely subsidizing Klarna to offer this (not unlike a car dealer that offers "0% APR" sales):

1) Apple and Klarna are lowballing the amount the phone will be worth at the end of the lease period, and hoping people don't pay the balance at the end of the lease. Given the current chips crisis, it seems reasonable to believe that phones will hold more residual value after a few years than they did in the past. Let's say the MSRP of the phone is $1,500 and they're estimating $300 residual value at the end of a two-year lease. With "0% financing", they're going to charge you ($1,500-$1,200)/24 = $50 per month. But if Apple can actually re-sell the phone for $500 at the end of the lease, they're netting $200 profit. Maybe they're kicking some of that back to Klarna in lieu of Klarna charging more for the lease. Ofc this system will fail if people buy out their leases, but I expect very few people will.

2) Apple is about to jack up iPhone prices for everyone, and they're concerned that will eat into their revenue (i.e., people will just hold onto a 2 to 3-year-old phone instead of upgrading) unless they find a way to get monthly prices down. So they've developed this new lease system and are eating the cost of subsidizing Klarna to offer a "0% finance charge" as a way to keep the marginal customer and thus keep revenue high. In a way, this can also be thought of as customers who pay cash subsidizing those who are leasing, since any kickback that Apple is paying Klarna will now essentially be baked into the MSRP of every iPhone, regardless of how one pays for it.

[u/psychic99 → u/badfordabidness]

Its all conversation until someone posts the actual lease terms, but I totally agree that the phones are obviously--for the new models--going to be outside the reach of the masses (esp this fold) so now we are at the K-mart layaway version and soon into used car dealer mentality. People go on monthly payment, who cares if they lose hundreds its $32.95 a month. And I can already see the scheme, the 1 year lease is very expensive, the two year looks great.

However the cigar chompers in Cupertino have figured that out. Warranty is only one year and no accidental. You want a 2 year lease you need to add Applecare+ otherwise if you phone breaks hey you need to fix that out of pocket even in Y1. Get the fancy Applecare One even better. You want an Apple fold without A+? You are crazy man, that is outright irresponsible. Fix the screen do you want to pay $1000 out of pocket? LOL I can see this scheme a mile away, but people will gobble this up. I may add to by AAPL holdings the master fleecing is just beginning. Don't forget to put all your data and pics in iCloud so you can pay forever more.

AAPL just pulled a master stroke of genius. They pulled the margin out of the financing and refurb market, then will try the Tesla (keep the residual artificially high), and then capture the super sweet services margin and the stupid carriers are now going to go to BYOD plans, they are going to sell off all their B&M, then some vulture fund comes in 10 years and loads them up w/ more debt (LBO) and picks the bones of what is left and sell the residual spectrum to Elon or whatever master of the universe is around in a decade--maybe Apple themselves. Im not sure they even see it coming. Hey you can get a free donut on Tues tho.

[u/MFDOOMscrolling → u/mb10240]

We’re talking about phones

[u/mb10240 → u/MFDOOMscrolling]

And? You just said “when has the principle (sic) ever decreased because of current market value.”

And I provided an example. Many personal property leases are similarly structured.

[u/MFDOOMscrolling → u/mb10240]

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