Apple kills its 11-year-old iPhone Upgrade Program for a Klarna-backed lease spanning every device it sells

Apple Killed Its Upgrade Program for a Klarna Lease

Apple replaced its long-running iPhone Upgrade Program on July 28 with Apple Upgrade, a Klarna-backed leasing program covering iPhone, iPad, Mac, and Apple Watch. 1 Bloomberg called the change one of the largest-ever shifts in how Apple sells its products. 2

The move is bigger than a product update. Apple just converted its hardware catalog from a buy-and-upgrade model into a perpetual lease, and it chose buy-now-pay-later company Klarna over bank Citizens Bank to run the financing. 2

What changed from the old program

The iPhone Upgrade Program was financing with a finish line. You made monthly payments with AppleCare+ bundled in, and at the end of the term you owned the phone. The new program is a lease. You do not own the device unless you pay a purchase fee at the end of the term, calculated as the difference between what you have paid and the retail price. 1

AppleCare+ is no longer included. Customers can add it separately or choose a plan called AppleCare One. 1

The old program covered only iPhones. Apple Upgrade spans iPhone, iPad, Mac, and Apple Watch. 3 Not every model qualifies: iPhone 16, iPhone 16 Plus, Apple Watch SE, MacBook Neo, Mac mini, iPad (A16), and Studio Display are excluded. 1

Monthly base prices run lower than the iPhone Upgrade Program's, starting at $17.99 per month for iPhone, $11.99 for Apple Watch, $11.99 for iPad, and $24.99 for Mac. 1 Lease terms run 12 or 24 months for iPhone and Apple Watch, and 24 or 36 months for iPad and Mac. 1

Customers already enrolled in the iPhone Upgrade Program can keep making payments until their current phone is paid off, but they cannot start a new purchase under the old program. 1

The Klarna bet and what it means for customers

The iPhone Upgrade Program was backed by Citizens Bank. Apple Upgrade is run by Klarna. 2 Klarna is not charging a fee for the program: an iPhone priced at $1,099 can be leased and then purchased for $1,099 total, with no markup beyond taxes. 1 Customers apply through a soft credit check and receive instant approval through the Klarna app, where they manage billing and payment schedules. 1

The partnership puts buy-now-pay-later infrastructure at the center of how Apple sells hardware. Apple shut down its own BNPL service in 2024 after the Consumer Financial Protection Bureau tightened regulations on the category, then began promoting third-party BNPL providers including Affirm and Klarna through Apple Pay. 2 Apple Upgrade takes that relationship from a checkout option to the primary purchasing rail.

The lease terms carry consumer consequences worth understanding. Missing a payment rolls into the next month with no late fee, but three consecutive missed payments end the lease and trigger the full outstanding balance minus the device's returned value. 1 Klarna assesses damage at return and charges accordingly. Without AppleCare+, the full assessed damage cost applies. 1

The strategic shift toward hardware-as-a-service

Apple reportedly explored a similar subscription program in 2024 but abandoned it over software bugs and regulatory concerns. 2 The timing of the launch is deliberate. Apple recently raised prices on many iPad and Mac models, and the next iPhone lineup is expected to cost more when it debuts in September. 3 Lower monthly lease payments make higher device prices easier to absorb while keeping customers inside Apple's ecosystem on a recurring payment.

For investors, the core question is whether customers accept hardware-as-a-service at scale. Apple Upgrade asks them to rent indefinitely, with the option to buy. If adoption is strong, Apple gains predictable recurring revenue across four product categories simultaneously. If customers reject the idea of never owning what they pay for, Apple has hedged by keeping the purchase option open and by maintaining Apple Card Monthly Installments as an alternative path. 1

For the payments market, the Klarna deal pushes BNPL from a checkout add-on toward mainstream infrastructure. When Apple picks a buy-now-pay-later company over a bank for its primary device financing, that is a structural endorsement of BNPL as a core payments rail, not a fringe feature.

Apple Card holders can still use Apple Card Monthly Installments to buy devices outright, and they earn 3% Daily Cash on Apple Upgrade lease payments made with Apple Card. 1