apple The company announced Tuesday that U.S. customers will soon be able to lease iPhones for up to two years at prices starting at $17.99 per month.
This program, called Upgrade, Klarnais a buy now, pay later loan provider offered through Apple’s physical and online stores. After passing a soft credit check, customers are offered a one- or two-year lease on the iPhone. Similar options will be available for the Apple Watch, as well as two- and three-year leases for Macs and iPads.
The announcement comes a month after Apple raised the initial prices of iPads and Macs by at least $100, and some models by more than $1,000, citing a global memory shortage. Analysts expect iPhone prices to rise this year and say leasing allows Apple to shift its focus from high upfront sticker prices to lower monthly payments.
“Most Apple consumers, especially in the U.S. and other developed markets, are buying devices on installment plans or trade-ins, so we can expect more aggressive offers,” Nabila Popal, senior research director at IDC, told CNBC in an interview after the company signaled price increases in June.
Apple is exploring new ways to offer iPhones in installments, a strategy investors have long believed will help smooth out the seasonality of the business and reduce the company’s dependence on hit device cycles for growth. Bernstein estimates that the average iPhone replacement cycle has grown to nearly four years, and the new program could encourage customers to replace their devices sooner.
For leases, the device must be returned at the end of 24 months. Users can also make additional payments at that point to purchase a mobile phone or upgrade to a new device. No deposit is required and Klarna doesn’t charge late fees, but will end your lease if you miss three months of payments.
Prices vary significantly and customers have to pay more for premium devices. For example, an unlocked iPhone 17 Pro costs $31.99 per month for two years or $45.99 for one year. Some of the company’s entry-level devices, such as the iPhone 16 and MacBook Neo, are not included in the program.
Analysts have been speculating that iPhone prices would rise since the hike was announced in June. Morgan Stanley estimates that Apple may need to raise the price of the iPhone 18 Pro by about $200 to maintain gross margins. According to TechInsights, higher costs for memory and other components can add up to $300 to an iPhone’s bill of materials, based on component-level decomposition.
Meanwhile, Apple is pushing its product mix further upmarket. Analysts expect the foldable phone to arrive alongside the iPhone 18 Pro lineup in September, with some estimates pegging the price at around $2,500.
Klarna’s new service offers potential customers a much cheaper lease option than before. Through the iPhone Upgrade Program, which includes AppleCare coverage, users can now pay more than $42 per month in 24 installments with financing from Citizens Bank. Apple announced Tuesday that it is discontinuing its iPhone Upgrade Program in the United States and moving customers to Apple Upgrade.
The new plan will put Apple in more direct competition with carriers. Carriers have traditionally used device financing and trade-in subsidies to attract customers and lock them into multiyear wireless plans. AT&T, verizon and T-Mobile all offer installment plans.
Apple also offers interest-free financing on its products through a program called Apple Card Monthly Localments. Additionally, Apple Pay users currently have access to short-term loans from Klarna or competitors. affirm.
Apple is scheduled to announce its third quarter results on Thursday. This will be CEO Tim Cook’s final financial report before he becomes chairman of the board.
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