Apple customers in the U.S. will soon be able to lease an iPhone for up to two years at a price starting at $17.99 per month, the company announced on Tuesday.
The program, called Upgrade, is a partnership with Klarna, a provider of buy now, pay later loans, that will be offered at Apple’s physical retail stores as well as its online store. After passing a soft credit check, customers will be offered a one- or two-year lease on an iPhone. There will be a similar option for an Apple Watch, or a two- or three-year lease available for Macs and iPads.
The announcement comes a month after Apple, citing the global memory crunch, raised starting iPad and Mac prices by at least $100, with some models increasing by more than $1,000. Analysts expect iPhone price hikes this year and say that leasing lets Apple shift the focus from a higher up-front sticker price to a lower monthly payment.
“Most of Apple’s consumers, especially in the U.S. and other developed markets, are buying devices on installment plans or trade-ins, so we can expect to see much 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 looking for new ways to offer iPhones through installment payments, a strategy that investors have long thought can help smooth the seasonality of the business and reduce the company’s reliance on hit device cycles for growth. The new program could also encourage customers to replace their devices sooner, with the average iPhone replacement cycle having stretched to nearly four years, according to Bernstein estimates.
As a lease, devices will have to be returned at the end of 24 months. Users can also purchase their phone at that time with an additional payment, or upgrade to a new device. No security deposit is required and, while Klarna won’t charge late fees, it will terminate leases after three months of missed payments.
Prices will vary dramatically, and customers will have to pay more for premium devices. An unlocked iPhone 17 Pro, for example, will cost $31.99 a 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, aren’t included in the program.
Since the announced hikes in June, analysts have been speculating about higher iPhone prices. Morgan Stanley estimates Apple may need to raise the price of the iPhone 18 Pro by roughly $200 to preserve its gross margin. According to TechInsights, higher memory and other component costs could add as much as $300 to an iPhone’s bill of materials, based on a component-level teardown.
Meanwhile, Apple is pushing its product mix further upmarket. Analysts expect a foldable phone to debut alongside the iPhone 18 Pro lineup in September, with some estimates putting its price at around $2,500.
For prospective customers, the new offering with Klarna offers a much cheaper leasing option than what has been available. Through the iPhone Upgrade Program, which includes the AppleCare warranty, users currently pay more than $42 per month in 24 installments, with financing from Citizens Bank. Apple said on Tuesday it discontinued the iPhone Upgrade Program in the U.S. and would transition customers to Apple Upgrade.
With the new plan, Apple will be competing more directly with carriers, which 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 zero-interest financing for its products through a program called Apple Card Monthly Installments. And for users of Apple Pay, short-term loans are currently available from Klarna or rival Affirm.
Apple is scheduled to report third-quarter earnings Thursday. It will be CEO Tim Cook’s final earnings report before he transitions to executive chairman of the board.
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