How much does an iPhone really cost?

An article written for the Street.com claims that the true cost of an iPhone is over $19,000. Yes, $19,000. How did the author, Mr. Brett Arends, come up with that figure? By using some very strange math. See if you can follow this. He claims that the phone itself is $599. OK, I’m with you there Brett.

Then he adds in the ATT service plan of $60 a month for two years. This adds $1440 bringing us to $2039. He then brings that up to $2720 for those who pay for it themselves (not a work phone) in a 25% tax bracket. A bit of a stretch, but OK.

Next up is taking that figure and removing it from potentially putting it into a retirement or IRA account spread out over 35 years. Uh…wha? Then he adds the interest of paying it off over a year on a credit card now claiming that this raises the cost to over $19,000.

While I couldn’t find fault with his math, I can certainly find fault with the whole premise. Are you really going to claim that people with enough disposable income (or even those without that much disposable income, but buy toys they don’t need anyway) to buy an iPhone plus a two-year service agreement would have put that money into their IRA instead?

Chances are if they didn’t have an iPhone, they would at least have a cell phone. OK, the cell phone (basic model) is free. The cost of a plan to use it is not. So, using my own fuzzy math, $30 to 50 a month for the cell phone. If they want a cell phone to use beyond just making calls, that cost goes up. Since we are talking about people wanting an Internet-enabled device like an iPhone, this is very likely. Their service plans are going to be very close in cost per month to the same type of service plans available for the iPhone.

To be fair, further in the article he says that he’s using this as an exercise to show that Americans on the whole do not save enough (this is true) and that we are obsessed with getting the latest toys. Also true, but couldn’t the point have been made with say, an HD television set or getting a new computer with all the bells and whistles?

So what conclusion can we come to? That the true cost of an iPhone IS…$499 to 599.