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iPhone 7 Shortages Are Turning Apple's iPhone Upgrade Program Into a Big Mess

Anyone enrolled in the program who doesn't upgrade their phone now might find themselves paying extra to upgrade a year from now.

Jason Koebler

Jason Koebler

Image: Apple

Update, 9/14/16: Apple has decided to make more stock available, see the bottom of this post.

Earlier this week, when I tried to explain the cost-benefit analysis of using Apple's iPhone Upgrade Program to switch from an iPhone 6S to an iPhone 7, I did it with one major assumption: That Apple would have phones available for you to upgrade to. It turns out that was a huge error in judgment—many iPhones are out of stock, which may have far-reaching and expensive consequences for customers.

Basically, the longer it takes you to upgrade your phone using the program, the more expensive it will be to stay on a yearly replacement schedule, for reasons I'll get to in a minute.

When Apple announced the iPhone Upgrade Program with the launch of the 6S last year, the main draw was the fact that it is essentially an iPhone subscription program. You're financing the phone and paying it off with monthly payments over the course of two years, but you'd have the option of trading in your phone for the latest model every single year. This means that if you signed up for the program at the launch of the 6S, you'd be ready to trade it in for an iPhone 7, essentially for free.

Apple gives anyone who has been enrolled in the program for at least six months the opportunity to upgrade, with the caveat that you must make the equivalent of 12 payments before you can get a new phone. This means if you signed up for the program six months ago, you would have made six payments of $36.58 ($219.48) on a 64GB iPhone 6S. To upgrade to a 128 GB iPhone 7 (the 64GB model has been discontinued), you need to pay an additional $219.48 when you swap the phone.

This "12 payment" rule is why it makes the most economic sense to upgrade your phone instantly, assuming you want to continue getting the newest iPhones at launch in perpetuity. Let's say you wait until November to upgrade your iPhone 6S to the iPhone 7—if Apple launches the 2017 iPhone in September and you want it at launch, you will be stuck making two extra payments of around $40 (depending on your model) to do so.

So now, on to why that information actually matters: On Friday at midnight Pacific, Apple opened up all iPhone 7 preorders. People who got on right away and were willing to pay the full cost of the phone up front had no problem reserving any model of phone, with any storage capacity, in any color. People involved in the iPhone Upgrade Program found that most models of the iPhone 7 Plus (with dual cameras, the only compelling upgrade option) were "Out of Stock" seemingly instantly.

Whereas it's possible to get a new iPhone shipped to you if you pay up front, Apple is only allowing iPhone Upgrade Program customers to get their new phones at Apple Stores. Apple hasn't stated a reason for why upgrade program customers need to go to the store, but it's presumably to both assess your old iPhone for any damage when you turn it in and to help you transfer your files to the new phone (whether these are legitimate reasons and preferable to simply sending a prepaid return envelope to customers is debatable).

This had the effect of creating two separate pools of phones to order from. If you paid up front, you were pulling from what appeared to be a universal stock list. But to upgrade your old iPhone using the upgrade program, stocks were allocated to specific stores. For instance, the Apple store in Manhattan's Upper East Side has 128GB iPhone 7 Pluses available in Rose Gold (and no other color), but the Williamsburg store in Brooklyn has only the 32GB model available (in only two colors). The in-store requirement makes it harder, obviously, to get your desired iPhone if you're a part of the upgrade program.

Another thing making it hard to get the specific iPhone you want is the fact that if you're an upgrade program member, Apple isn't even offering the option to preorder or get on a waitlist for phones that aren't in stock. I think I've decided to upgrade to a 128GB iPhone 7 Plus, but the only ones available right now in my area are Rose Gold—there's no indication when other colors will come back in stock, there's no option to be notified of when they are, and there's no option to simply reserve, say, a Jet Black one, and just get it when it's ready. If you're willing to pay up front, however, you can preorder a Jet Black one right now for November delivery.

But as I mentioned, it's optimal to upgrade the phone as quickly as possible: If Jet Black iPhones 7 Pluses come back in stock for upgrade customers in November, those people will be stuck paying an extra $90 by the time the 2017 iPhone comes out. So by not getting a new iPhone now, you are falling behind next year's cycle.

I've reached out to Apple with the following questions, I'll update when and if I hear back:

A) Was there a different pool of iPhones for customers involved in the program?

B) When will more iPhones be made available for those in the program?

C) If customers have to wait several months to upgrade to the iPhone of their choice, will they still be subject to the 12 payments necessary to upgrade to next year's phone?

If this all sounds like a confusing mess, well, it is. As you'd expect, people are decidedly Mad on Twitter and on Apple blogs, with lots of upgrade customers complaining that Apple is mistreating its most loyal customers.

In recent years, Apple has been pretty good about making enough iPhones available at launch; last year, I walked into a store in Manhattan on launch day and walked out with a phone 15 minutes later. It's entirely possible Apple will have a new stock of phones available for upgrade customers before or on launch day. But with presumably millions of customers now eligible for what are essentially free upgrades, it's looking very much like Apple's got a logistical problem it's not prepared to handle.

Update: Apple has sent an email to all iPhone Upgrade Program customers noting that it has made more inventory available. I was able to reserve nearly any iPhone in any color (except Jet Black) for launch.