What’s the Catch with the Apple Upgrade Program?
Apple’s new Upgrade Program has arrived, promising a way to lease select iPhones, iPads, Macs and Watches for a relatively low monthly payment. The company says you won’t pay more than the full retail price over the one- to three-year lease, and in some cases you’ll pay hundreds of dollars less. On the surface, this sounds like a fantastic deal. But like any contract involving monthly payments and trade-ins, there are important caveats.
How the Apple Upgrade Program Works
The program works like a standard lease. You choose a device and agree to pay a fixed monthly fee for the length of the contract, which can be one, two, or three years. At the end of that period, you have three choices. You can buy the device outright by paying the difference between what you’ve already paid and its original retail price. You can simply return the device and walk away, surrendering any resale or trade-in value. Or you can upgrade to a newer device and begin a new monthly payment plan.
For example, if you lease an iPhone Air for two years at a total of $695.76, you would need to pay an extra $303.24 to purchase it at its $999 price tag. If you choose to return it or upgrade instead, that $303.24 is never paid, but you also end up with no asset to resell or trade in.
The Loan Behind the Lease
The single biggest catch is that the Upgrade Program is, at its core, a loan. It is offered through the buy now, pay later service Klarna, and there is a binding contract with fees and terms you must follow. Apple says there are no late fees and no interest on the loans. However, Klarna has stated that if you miss three consecutive payments, the company will terminate the lease agreement and require you to pay the full outstanding balance immediately. If you fail to do that, the debt could be transferred to a debt collection agency, although it remains unclear whether that specific policy applies to the Apple Upgrade Program.
At one point, code in an Apple system suggested the company might restrict device functionality if payments were missed, but Apple has confirmed that no limitations will be placed on the device itself. Even so, the financial consequences of defaulting on a lease can be serious, and adding this payment to your existing bills and subscriptions can increase the risk of debt.
The Hidden Costs of Upgrading
One of the most overlooked downsides is the opportunity cost of upgrading rather than buying. When you lease a device and then upgrade at the end of the lease, you forfeit any resale or trade-in value the device may have. Let’s say you lease an iPhone 17 for two years and pay $551.76. If you choose to upgrade to the next model instead of paying the additional $247.24 to buy the iPhone 17 at its original $799 price, you miss out on the cash you could have earned by selling the phone or trading it in.
Smartphone depreciation is steep. Data from price comparison sites suggests that iPhones lose around 35 to 40 percent of their value two years after launch. Using that estimate, a used iPhone 17 could resell for approximately $520 after two years. In effect, you would have spent only $279 to use the phone for those two years if you bought it and then sold it. By upgrading through the lease program, you don’t get any of that money back, making the “savings” from lower monthly payments less compelling.
Damage, AppleCare, and End-of-Lease Conditions
During the lease period, Klarna owns the device. You are responsible for any damage, and you will be charged a fee if you fail to return the device in good condition. This is why Apple encourages customers to add an AppleCare subscription, which can significantly increase the monthly cost of the lease. AppleCare for iPhone starts at $9.99 per month, iPad protection starts at $5.49 per month, Mac coverage starts at $3.99 per month, and Watch Series 11 and later coverage is priced at $4.99 per month. There is also an option to pay $19.99 per month to protect up to three devices.
If you decide you want to return the device before the lease term ends, or upgrade early, you’ll have to pay an early termination fee. Apple also gives you a six-month window after the loan is paid off to decide whether to upgrade, exit the program, or purchase the device. During that six-month period, you are still charged the monthly payment. If you don’t make a decision promptly, the program becomes significantly less attractive.
Understanding Your End-of-Lease Options
If you decide to buy the device after the lease term, you are not paying the full retail price again—you are paying the remaining balance. That sounds straightforward, but it is worth doing the math. Over the course of a two-year lease, you might pay around two-thirds of the device’s retail price. The final balloon payment brings your total to exactly the retail price, not more. In that sense, the program is effectively an interest-free installment plan with a deferred balance. The problem is that many people won’t have that balloon payment anticipated, and if they choose to upgrade instead, they lose all equity in the device.
Returning the device is the easiest option, but it comes with its own downside. You have no asset to show for the money you paid, and the device goes back to Apple or Klarna to be refurbished or resold. Upgrading is the most attractive option for people who always want the latest model, but it also means signing up for a new loan and potentially paying higher monthly fees if the new device costs more. The decision should be made based on your long-term plans, not just the monthly payment amount.
Upgrading Before the Lease Ends
Some leasing programs allow you to upgrade after you have paid a certain portion of the lease, but the Apple Upgrade Program requires you to pay an early termination fee if you want out before the contract expires. That fee can eat away at any savings. Even if you are only a few months from the end of the lease, the fee might be significant. It is also worth noting that the six-month window after the lease ends is not a grace period: you still pay monthly during that time. So if you are thinking about upgrading to, say, the next iPhone when it launches, but the launch is three months after your lease ends, you could be paying for three months of a device you are about to return.
The Shift to Leasing and Buy Now, Pay Later
The launch of Apple’s Upgrade Program comes as the consumer tech industry increasingly moves away from one-time purchases and toward subscription-style ownership. Leasing smartphones has been a common model in other parts of the world, particularly in Asia and Europe, where carriers often bundle the cost of a handset into a monthly service plan. In the United States, most people buy phones through carrier installment plans that ultimately lead to ownership. Apple’s program is different because it is a true lease, and the device reverts to Apple unless you pay a balloon payment at the end.
This structure has a few effects. It makes high-end devices feel more accessible by lowering the upfront cost to zero and spreading payments across the year. It also makes it easier for people to upgrade on a regular cycle, which is appealing to early adopters. On the other hand, it means you never have an asset you can sell or use as leverage. After two years of payments, you either have to keep paying to own the device, hand it back, or start a new lease. That is a fundamental difference from buying a phone with a credit card or a standard loan.
Why Apple and Klarna Benefit
The program is also a strategic move for Apple. It encourages customers to stay within the Apple ecosystem and upgrade more frequently than they might if they had to pay full price each time. It also shifts some of the financial risk and customer relationship management to Klarna. In exchange for enabling the loan, Klarna gains access to customer purchase data, which it uses to deliver personalized ads. This is another reminder that buy now, pay later services are not purely charitable—they derive revenue from data, and sometimes from the interest or fees that apply when customers fail to meet their obligations.
For consumers, the key takeaway is to read the terms carefully and think about how long you really plan to keep the device. The monthly payment may look small, but the total cost can be similar to buying the device outright when you factor in lost resale value. And if you miss payments, the consequences can extend far beyond losing the device—they can include debt collection and damage to your credit score. As with any loan, your ability to make timely payments is the most important factor in determining whether the Apple Upgrade Program is truly a good deal.
Source: The Verge News