Experts call Apple's new lease plan an attempt to 'mask the effect of rising hardware costs'

Today Apple announced its new leasing program, Apple Upgrade which is undergirded by Klarna for iPhone, Apple Watch, Mac and iPad.

The program lets customers sign up for a plan, similar to how you would lease a car, for fixed 12-, 24- and 36-month terms depending on the device. There are options to upgrade to a new device early or return it at the end of the lease.

Apple called the new plan a "more flexible way to pay for products."

It's possible this does offer some flexibility from paying an upfront lump sum or tying yourself to an onerous contract via a network carrier like Verizon or T-Mobile.

However, experts I spoke with think the Upgrade plan is meant to cover rising component costs.

"By shifting the focus to lower monthly payments, it helps mask the effect of rising hardware costs and makes premium devices feel more affordable and attainable for a broader range of consumers," Jitesh Ubrani, a director at IDC, said.

They added that it could entice people who don't want to pay the higher upfront costs, as even Apple has hiked prices recently. It also gives Apple a "steady stream of trade-ins" that the company can resell to expand its customer base.

"Many people are effectively leasing their phones already through carrier plans; leasing a watch or a Mac -- when you know that these are also devices that have upgrade cycles -- can make sense," Techsponential's Avi Greengart told Tom's Guide. "it's still a lease, so you won't be able to use it until it dies unless you buy out the lease, and it may not be the absolute most economical approach."

Beyond upfront prices, is Apple Upgrade better for you? Let's take a look at how the program works.

How Apple Upgrade works

Apple Upgrade offers 12- or 24-month lease terms for eligible iPhones and Apple Watches. For those seeking a Mac or iPad, there are 24- or 36-month options.

Prices start as low as $11.99 per month for the Apple Watch and iPad, depending on size and storage capacity. iPhones start at $17.99, while Macs can be leased starting at $24.99 a month.

You can sign up online or at an Apple Store, where you will be approved by Klarna, which does require a soft credit check that should not impact your credit score.

At the end of the lease term, you can return the device or upgrade to a newer generation or purchase it with a one-time payment.

Compared to the outgoing iPhone Upgrade program, the Apple Upgrade Program does not include AppleCare, which is a separate subscription price and varies in price depending on your device.

Per MacRumors, if you miss a payment, it will be rolled into the next month's payment with no late fees. However, if you miss three consecutive payments, the lease will end, and you will have to pay the full outstanding balance, minus the value of the device when returned. If Klarna can't collect, a debt collection agency will be sent your information.

Apple Upgrade prices

Apple is offering the entire iPhone 17 lineup, plus the iPhone Air, both the Apple Watch Series 11 and Apple Watch Ultra 3 and three iPad options, including the iPad Air, iPad Pro and iPad mini.

For Macs, you can lease the MacBook Air, MacBook Pro, iMac and Mac Studio.

Apple defaults to the 24-month leasing option, so we'll share that. The other options can lower or raise your price. Additionally, higher storage capacity or chip versions will also increase the monthly price.

Finally, the price does not include taxes and fees.

Here's how much the base model of each device will cost you.

We've separated the iPads and Macs out because these devices can have the longer 36-month term. Again, the prices below are for the base model of each device and the 24-month term.

No leasing entry-level devices

You may have noticed several Apple devices aren't eligible for the upgrade program. It includes the vanilla iPhone 16 and iPhone 16 Plus, as well as the entry-level models of almost every device category.

Here's the full list of Apple products you can't lease:

• iPhone 16
• iPhone 16 Plus
• Apple Watch SE
• MacBook Neo
• Mac mini
• iPad (A16)
• Studio Display

Availability

Apple Upgrade is available now for all of the listed devices. Apple says that a security deposit is not required and that a trade-in device could reduce monthly payments.

I will note that if you end a lease early, you could see termination fees. Also, if you don't do anything at the end of the lease, you'll be charged the purchase fee.

Lastly, hidden in the fine print, upgrading a device could increase your monthly payments, which is true for both higher-capacity versions of devices and more expensive models when new generations launch in the coming years.

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