Making The Grade: AppleCare+ is a terrible investment for iPad deployments

Making The Grade is a weekly series from Bradley Chambers covering Apple in education. Bradley has been managing Apple devices in an education environment since 2009. Through his experience deploying and managing 100s of Macs and 100s of iPads, Bradley will highlight ways in which Apple’s products work at scale, stories from the trenches of IT management, and ways Apple could improve its products for students.

Every couple of years, I make a large purchase with Apple for my school. We work directly with Apple on the products, and we even lease everything directly through Apple Financial Services (with a $1 buyout at the end). It’s a process that takes a few weeks to work through as we go back and forth with Apple on price, product model, and leasing terms. One item that always comes up is AppleCare+. It comes up once, and I decline it. There is often discussion amongst technology buyers on whether AppleCare+ is worth the price or not for personal products. I see it both ways for individuals. Schools and businesses, on the other hand, should almost never buy AppleCare+ for any of their products, and particularly not the low end iPad. Here’s my rationale for that:

K–12 schools can buy a ten pack of the 6th generation 32 GB model for $2,940 US. This same SKU with AppleCare+ is $3,530.00 US for the two-year coverage or $3,730.00 US for the three-year coverage. This upgrade is a difference of $590/$790 USD. Buying AppleCare+ on a ten pack of iPads increases the price by around 18% and 24% respectively.

Before I look at the overall cost impact, let’s consider what AppleCare+ brings regarding benefits:

• $49 screen repairs and coverage of other accidental damage
• 2/3 years of software technical support via phone
• 2/3 years of hardware support

For the rest of this article, I am only going to look at the three-year version of AppleCare+ as it has a dramatically lower cost per year than the two-year option. If you are buying 1,000 iPads (100 ten packs) for your school district, this is an increase of $79,000. That is, in my experience, a lot of money.

Let’s examine these benefits to see when they might be worth the money. I am going to ignore the software support benefits because it’s not something that most schools will use. There are plenty of free resources online to help IT departments troubleshoot software issues, and I’ve been supporting Apple products long enough to know what to do. I suspect most schools are in this same boat. If they don’t have someone to support their products onsite, then they have higher level IT issues that is drastically worse than buying AppleCare+.

The most common repair for iPad is a damaged screen. Even with AppleCare+, it’s not a free repair as it comes with a $49 deductible. Out of warranty screen repairs for the 6th generation iPad are $249. While $249 is getting close to cost of the original purchase, it’s still going to be less expensive than buying a new one at $299.

If we go back to our original quote, each iPad will roughly cost $79 more to have it covered with AppleCare+ for three years. How many iPads do have you have to have repaired before the AppleCare+ add-on is financially worth it? Let’s look at a damage rate of 15% over three years. If you have 150 iPads that get screens repaired, you’ll end up paying $86,350 over the lease term (our original $79,000 AppleCare+ add-on plus $7,350 in deductibles).

What happens if you don’t have AppleCare+ and you have a 15% damage rate? Your repair bill will be $37,350. This price is a difference of $49,000 in your overall price. A 15% damage right is dramatically higher than my school, but I know that all deployments are different. You will have to see a screen damage rate of around 40% before AppleCare+ becomes financially viable.

Here’s my math: Again, I’m using a model of 1,000 iPads for my example. If we have a 40% damage rate, that is 400 iPads. If you multiply 400 iPads with the $49 deductible/service fee, you get $19,600. If you had the original $79,000 in AppleCare+ fees, you get a total cost of $98,600. If you didn’t buy AppleCare+, your repair total would be $99,600. If we do the same numbers, but change it to 395 (39.5%) iPads needing repair, the AppleCare+ total comes to $98,355 ($79,000 AppleCare+ add-on + $19,355 in deductibles/service fees). Without AppleCare+, your repair bill would also come to the same $98,355 ($249 X 395). As you can see, you are going to need to see a damage rate of around 40% before you start coming out better with AppleCare+ in the end.

When other schools ask my advice on AppleCare+, I tell them they are better off self-insuring against repairs. Instead of buying AppleCare+ at $79,000, add $25,000 to your annual budget as a repair contingency. If you end up needing it, you’ll have it in the budget. If you don’t, then you have saved the money. If that isn’t an option due to how you are funded (grant money, etc), you’d be better off purchasing extra devices to deploy as replacements instead of buying AppleCare+. What damage rates are you seeing? Let us know in the comments below.