Apple Is Rolling Out iPhone Leasing Starting at $17.99 a Month, Right Before Prices Go Up

Apple wants you thinking in monthly payments, not sticker prices. The company announced Tuesday that U.S. customers will soon be able to lease an iPhone for as little as $17.99 a month, through a new partnership with buy-now-pay-later firm Klarna.

The program, called Apple Upgrade, will be available at Apple's retail stores and online. Shoppers who pass a soft credit check can lease an iPhone for one or two years, an Apple Watch on similar terms, or a Mac or iPad for two or three years. No security deposit is required, and Klarna says it won't tack on late fees, though it will cut off a lease after three months of missed payments.

The timing is not a coincidence. A month ago, Apple raised starting prices on iPads and Macs by at least $100, citing a global squeeze on memory chips, with some configurations jumping by more than $1,000. Analysts widely expect iPhone prices to rise too when the next lineup arrives. Leasing gives Apple a way to soften that blow, at least psychologically, by putting a low monthly number in front of customers instead of a bigger number at checkout.

Nabila Popal, senior research director at IDC, told CNBC after Apple's June price signals that the shift toward financing was already underway. "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," she said.

Why Apple wants you leasing, not buying

Financing plans aren't new for Apple, but leasing is a meaningfully different pitch. Investors have long viewed installment-style programs as a way to smooth out the lumpiness of Apple's business, which has historically leaned hard on splashy new device launches to drive sales. A steady stream of monthly payments looks a lot more predictable on a balance sheet than a spike tied to a single September announcement.

There's also a replacement-cycle problem. According to Bernstein estimates, the average person now holds onto an iPhone for close to four years before upgrading, longer than it used to be. A lease that expires after 24 months and nudges users toward trading in for something new is a fairly direct lever against that trend.

The mechanics reflect that intent. At the end of a 24-month lease, the phone has to go back to Apple, unless the customer pays extra to buy it outright or rolls into a new device. It's less "you own this" and more "you're renting the newest version of this, indefinitely, if you keep paying."

What it costs, and what's excluded

Pricing scales steeply with the device. An unlocked iPhone 17 Pro runs $31.99 a month on a two-year lease, or $45.99 a month over one year. Apple's entry-level hardware, including the iPhone 16 and the MacBook Neo, isn't part of the program at all, so this is squarely aimed at people buying (or leasing) into the higher end of the lineup.

Compare that to what Apple offered before. The old iPhone Upgrade Program, financed through Citizens Bank and bundled with AppleCare, ran more than $42 a month over 24 installments. Apple confirmed Tuesday that it's discontinuing that program in the U.S. and moving existing customers over to Apple Upgrade. The company still offers interest-free financing through Apple Card Monthly Installments, and short-term loans through Klarna or rival Affirm remain available for Apple Pay users.

The bigger pricing squeeze

The backdrop here is a broader cost problem. Morgan Stanley estimates Apple may need to raise the price of the iPhone 18 Pro by around $200 just to hold its profit margins steady. TechInsights, using a component-level teardown, puts the potential hit from rising memory and other part costs at as much as $300 added to the bill of materials for a single iPhone. None of that is guaranteed to land dollar-for-dollar on customers, but it's the kind of pressure that makes a cheaper monthly lease option a useful release valve, at least optically.

Apple is also pushing further upmarket elsewhere. Analysts expect the company to debut a foldable phone alongside the iPhone 18 Pro lineup in September, with some estimates pegging its price around $2,500. A leasing program that starts under $18 a month gives Apple a low end to point to even as its actual product mix skews pricier.

Squeezing carriers, not just customers

By offering its own lease directly, Apple is also stepping more forcefully into territory long dominated by wireless carriers. AT&T, Verizon and T-Mobile have used device installment plans and trade-in subsidies for years as a way to lock customers into multiyear service contracts. Apple Upgrade gives the company a path to sell hardware financing on its own terms, without routing customers through a carrier's plan to get there.

Apple is set to report third-quarter earnings on Thursday. It's a notable one: the last earnings call CEO Tim Cook will lead before moving into the role of executive chairman of the board. Whether Apple Upgrade shows up as a meaningful data point in that report is unlikely this soon, but it sets the tone for how the company plans to manage pricing anxiety heading into a fall lineup that's shaping up to be more expensive across the board.