The way you pay for your iPhone is about to change

For years, Apple has said the iPhone starts at $199.
That'll likely stop this year.
Despite what Apple and your carrier may tell you, your
iPhone doesn't cost $199.
That price, which you'll see all over the ads and other
marketing materials for the iPhone, is actually the
subsidized price of the phone when you sign up for a
two-year contract with your carrier. The real cost of the
iPhone is $649 or higher, depending on the model you
choose.
On Friday, Verizon announced a bombshell that will
likely affect the way Apple markets the next iPhone. On
August 13, Verizon will end service contracts, which
means new subscribers won't be able to get an iPhone
or any other smartphone for the subsidized price.
Instead, you'll have to pay the entire cost of the device
up front or agree to pay it off a little at a time in monthly
installments.
It's a great move from Verizon, one that'll bring more
transparency to your monthly bill . Before, Verizon would
stuff the rest of the cost of your iPhone into your
monthly bill, but you'd still have to keep paying the
same price, even after two years when your phone was
supposedly paid off. The new system ensures you can
keep your phone for over two years and not have to
worry about paying more than you have to.
Since Verizon is the largest wireless carrier, it puts
Apple in a sticky situation this year — it probably won't
be able to say you can get the iPhone for $199 and up.
Plus T-Mobile, the third-largest wireless carrier, hasn't
had contracts since 2013.
So, what will Apple do? If it says the iPhone 6S — or
whatever the next iPhone is called — costs $649 and up,
it'll seem to many that the iPhone is suddenly $450
more expensive than it was last year.
T-Mobile
T-Mobile sells the iPhone 6 for $0 down, but there are
also monthly payments.
Instead, Apple will likely play up the monthly payment
plans Verizon, T-Mobile, and the others offer. (AT&T and
Sprint still have contracts, but also have monthly
payment plans for phones.)
We don't know specifically how Verizon's phone
payment plan will work, but it'll likely be similar to T-
Mobile's system, which lets you get an entry-level
iPhone for $0 down and about $27 per month for 24
months.
The most likely scenario at this year's iPhone event:
When Apple brings up the new iPhone pricing on the big
screen, it'll probably say something like "Starting at $0
down" instead of "Starting at $649." That'll be easier to
swallow, and, in a strange way, could make the iPhone
look even cheaper than it was before.
But the bottom line is this: No matter what a
smartphone maker or carrier says, your smartphone will
always end up costing you hundreds more in the long
run than what you see advertised.