Apple shifts US device sales to Klarna leasing model to soften price hikes
Apple has replaced its traditional hardware upgrade scheme with a Klarna-backed leasing model in the US, a move designed to mask rising device prices and accelerate consumer upgrade cycles ahead of Tim Cook’s transition to chairman.
Apple launched a new device leasing programme called Apple Upgrade in the United States on Tuesday. Run by the buy-now-pay-later lender Klarna, the scheme covers iPhones, iPads, Macs and Apple Watches, with monthly payments starting at $17.99.
The launch effectively retires the iPhone Upgrade Program that the tech giant has operated since 2015. It arrives just six weeks after the company raised Mac and iPad prices by up to $100, citing an AI-driven memory shortage.
Chief executive Tim Cook described those hardware increases as unavoidable and warned that iPhone prices would follow. Rather than lowering the sticker price, the new leasing model shifts the financial burden into smaller, predictable monthly installments.
Dipanjan Chatterjee, an analyst at Forrester, noted the psychological shift this creates for buyers. “It doesn’t reduce the price of an iPhone, but it changes how consumers perceive the cost by replacing sticker shock with a predictable monthly payment,” he said.
Under the new terms, Klarna retains ownership of the hardware throughout the contract. Customers can upgrade, pay a lump sum to buy the device, or return it at the end of the term. Inaction results in a transition to month-to-month payments, which Apple warns may increase, before an automatic purchase charge is applied.
The arrangement carries strict conditions that differ from the previous scheme. AppleCare is no longer bundled, and early termination or upgrades incur what the company describes as substantial fees. Users must also return the device in good condition to avoid damage penalties.
Critics have condemned the shift as “the financialization of the affordability crisis.” Concerns were also raised after code in an iOS 27 beta suggested missed payments could trigger a Restricted Mode that locks users out of apps.
Apple quickly dismissed the bricking fears. “There will be no limitations put on device functionality due to missed payments,” spokesperson Brian Bumbery said. However, Klarna retains significant leverage, noting that three consecutive missed payments will terminate the lease and make the entire balance immediately due.
For Apple, the strategy addresses a structural challenge in the smartphone market, as consumers now keep their iPhones for nearly four years. Leasing encourages annual or biennial upgrades, smoothing out the lumpy, launch-driven sales cycles that investors typically dislike.
The move also positions Apple in direct competition with mobile network operators, which have long used device financing to secure wireless contracts. This becomes particularly relevant as analysts expect the upcoming iPhone 18 to carry higher price tags, with a rumoured foldable model costing nearly $2,500.
The transition marks another step in Cook’s decade-long effort to transform Apple into a subscription-driven enterprise. He presents the company's financial results on Thursday during his final quarter as chief executive before assuming the role of chairman.
