Apple iPhone leasing starts at $17.99 a month in Klarna deal

Apple iPhone leasing will soon be available in the U.S. through a partnership with Klarna, with monthly payments starting at $17.99 for terms of up to two years, Apple announced Tuesday. The programme shifts more of Apple’s device sales pitch toward recurring monthly costs at a time when analysts expect higher iPhone prices and carriers continue to use financing offers to win customers.

The plan, called Upgrade, will be available through Apple’s stores and online shop. Klarna, a buy now, pay later lender, will run the financing process, including a soft credit check before customers receive lease terms.

Apple said customers will be able to choose a one-year or two-year lease for an iPhone. Similar leasing will be offered for Apple Watch, while Macs and iPads will be available on two-year or three-year terms.

How does Apple iPhone leasing work?

A lease gives the customer use of the device for a fixed period, while ownership remains separate from the monthly payment plan. At the end of a 24-month iPhone lease, Apple said customers must return the device, buy it with an additional payment or move to a new device.

The programme will not require a security deposit. Klarna will not charge late fees, but Apple said leases will be terminated after three months of missed payments.

Prices will depend on the device and term. Apple said an unlocked iPhone 17 Pro will cost $31.99 a month over two years, or $45.99 a month over one year. Some entry-level products, including the iPhone 16 and MacBook Neo, are not part of the programme.

Why Apple is changing device financing

The leasing plan follows Apple’s June decision to raise starting prices for iPads and Macs by at least $100, with some models rising by more than $1,000. Apple cited the global shortage of memory components in explaining those increases.

Analysts have also been assessing the risk of higher iPhone prices. Morgan Stanley estimates Apple may need to lift the iPhone 18 Pro price by about $200 to preserve gross margin. TechInsights, citing a component-level teardown, said higher memory and other parts costs could add as much as $300 to an iPhone’s bill of materials.

Nabila Popal, senior research director at IDC, told CNBC after Apple signalled price increases in June that many Apple customers in the U.S. and other developed markets already use instalment plans or trade-ins. She said that pattern could lead to more aggressive offers.

For Apple, leases may reduce the emphasis on the full purchase price and could encourage more frequent upgrades. Bernstein estimates the average iPhone replacement cycle has lengthened to nearly four years.

The structure also puts Apple in closer competition with wireless carriers. AT&T, Verizon and T-Mobile have long used device instalments and trade-in subsidies alongside multiyear service plans.

Apple said it has discontinued the iPhone Upgrade Program in the U.S. and will move customers to Apple Upgrade. The older programme, financed by Citizens Bank and bundled with AppleCare, currently costs more than $42 a month over 24 instalments.

Apple still offers zero-interest product financing through Apple Card Monthly Installments. Apple Pay users can also access short-term loans from Klarna or Affirm. Apple is scheduled to report third-quarter earnings Thursday, its final earnings report before Chief Executive Tim Cook moves to executive chairman.

This story draws on original reporting from CNBC.