Key Highlights

  • Apple announced a new leasing program called Upgrade, offering one or two year iPhone leases starting at $17.99 per month through a partnership with Klarna.
  • The program follows Apple's decision last month to raise starting iPad and Mac prices by at least $100, with some models increasing by more than $1,000 due to a global memory shortage.
  • An unlocked iPhone 17 Pro will cost $31.99 a month over two years or $45.99 for one year, while entry level devices like the iPhone 16 are excluded from the program.
  • Apple discontinued its existing iPhone Upgrade Program, which cost more than $42 per month through Citizens Bank financing, transitioning customers to the new Klarna-backed offering.

A New Leasing Structure Aimed at Softening Sticker Shock

Apple customers in the US will soon be able to lease an iPhone for up to two years through a new program called Upgrade, developed in partnership with buy now, pay later provider Klarna, with pricing starting at $17.99 per month. The offering will be available at Apple's physical retail stores and online, with customers subject to a soft credit check before being offered one or two year iPhone leases, similar terms for Apple Watch, and two or three year lease options for Mac and iPad devices.

The announcement arrives roughly a month after Apple raised starting iPad and Mac prices by at least $100, citing the global memory chip shortage, with some models seeing increases exceeding $1,000. Industry analysts have noted that shifting toward leasing allows Apple to redirect customer attention from a higher upfront price toward a comparatively lower monthly payment figure.

Leasing Terms and Strategic Rationale Behind the Shift

Under the new structure, devices must be returned at the end of a 24 month lease term, though customers retain the option to purchase the device outright with an additional payment or upgrade to a newer model at that point. No security deposit is required, and while Klarna will not charge late fees, it will terminate leases following three months of missed payments. Pricing varies significantly by device tier, with an unlocked iPhone 17 Pro costing $31.99 monthly over two years or $45.99 over one year, while certain entry-level devices such as the iPhone 16 and MacBook Neo remain excluded from the program.

The strategy reflects a broader industry pattern, with one IDC research director noting that most Apple consumers, particularly in developed markets, already purchase devices through installment plans or trade-ins, suggesting more aggressive financing offers are likely to become increasingly common. The new program could also shorten replacement cycles, which have stretched to nearly four years on average according to Bernstein estimates, potentially benefiting Apple's device turnover rate.

Rising Component Costs Point Toward Further Price Pressure Ahead

The leasing announcement comes amid growing analyst speculation about further iPhone price increases tied to component costs. Morgan Stanley estimates Apple may need to raise iPhone 18 Pro pricing by roughly $200 to preserve gross margin, while TechInsights component-level analysis suggests higher memory and other costs could add as much as $300 to an iPhone's bill of materials. Apple is also reportedly pushing its product lineup further upmarket, with a foldable phone expected to debut alongside the iPhone 18 Pro lineup in September at an estimated price point around $2,500.

The new Klarna partnership notably undercuts Apple's prior financing option, the iPhone Upgrade Program, which required more than $42 monthly across 24 installments through Citizens Bank and has now been discontinued in the US. This shift positions Apple to compete more directly with wireless carriers including AT&T (NYSE:T), Verizon (NYSE:VZ), and T-Mobile (NASDAQ:TMUS), which have traditionally used device financing and trade-in subsidies to secure multiyear customer commitments.

Conclusion

Apple's new leasing partnership with Klarna represents a deliberate strategic response to anticipated price increases across its device lineup, allowing the company to maintain sales momentum by emphasizing affordability through monthly payments rather than absorbing margin pressure from rising component costs. With Thursday's third-quarter earnings report set to mark CEO Tim Cook's final results before transitioning to executive chairman, investor attention may focus closely on how this financing shift, alongside expected iPhone 18 pricing decisions, shapes Apple's near-term revenue and margin trajectory.