What’s the Catch With Apple’s New Upgrade Program?
Apple’s new Upgrade program comes with a catch that’s easy to miss if you’re only looking at the low monthly price. Apple Upgrade lets US customers lease an iPhone, iPad, Apple Watch, or Mac on a monthly basis. Unlike the iPhone Upgrade Program it’s set to replace, you don’t actually own the device you’re leasing unless you pay an additional lump sum at the end of the contract. Here’s what buyers need to know about the catch in Apple’s new Upgrade Program.
How Apple’s New Upgrade Program Works
Apple’s new Upgrade Program is technically a lease through third-party financing company Klarna. Prices start as low as $17.99 a month for an iPhone, $11.99 per month for an Apple Watch or iPad, and $24.99 per month for a MacBook Air. A soft credit check that doesn’t impact your score is required for financing, and you can qualify for instant approval online or in an Apple Store.
Lease terms are either 12 or 24 months for the iPhone and Apple Watch, and 24 or 36 months for the iPad and Mac. Customers can then choose to upgrade to a new device, buy their leased device outright with an additional payment, or return it and walk away once their lease is up. The catch in Apple’s Upgrade Program is that the six-month window to make these decisions is more generous than it looks. If you decide to keep your current device, you have the freedom to do so for up to six months after your initial 24- or 36-month lease term has expired, without being charged any additional fees.
Another detail to keep in mind is that AppleCare+ coverage isn’t automatically included in your monthly payments like it was with the old iPhone Upgrade Program. It’s available as an add-on in the Apple Upgrade Program, along with a separate subscription-only AppleCare One service.
The Big Catch in Apple’s Upgrade Program is that You’re Leasing, Not Buying
The fundamental difference between the new and old iPhone Upgrade Programs is that the latter was technically a purchase plan with monthly installments, while the one run by Klarna is a lease. You can think of it as similar to the kind of financing arrangements that Citizens Bank used to offer for Apple devices. You make monthly payments towards a device, and you own the phone when you buy it outright, either by paying an additional lump sum at the end of your contract or by continuing to pay monthly payments for the next 24 months.
By contrast, Apple’s Upgrade Program doesn’t give you ownership of the device you’re leasing, unless you pay off the remaining balance due on the device. According to reports, Klarna doesn’t appear to be pocketing any additional sum when you buy out your lease, so if you pay $$1,099 iPhone and later decide to buy it outright, the total cost should land close to $1,099 plus tax for a particular model of iPhone, that’s all you owe to actually own the device. One potential upside of Apple’s new Upgrade Program is that it doesn’t appear to have exorbitant markup fees for outright purchase of a leased device from Klarna, as some retail financing companies tend to do. But that’s cold comfort for consumers who’ve been used to the old “buy now, pay later” installment plans for phones, where you owned the phone when you bought it.
The other big caveat is right in the fine print about the return policy. Because the phone is technically leased from Klarna until the end of the contract, you’ll be expected to return it in good condition, and you may incur additional charges if you don’t. It’s similar to the current terms and conditions of trade-in programs at Apple Retail Stores. Fortunately, it appears that you can return a leased device to Apple in much the same way as a traded-in device, including shipping it back in a pre-paid, pre-labeled box.
Apple’s New Upgrade Program Compared to the Old iPhone Upgrade Program
When considering the catch in Apple’s Upgrade Program, it’s also important to highlight what it’s replacing, the original iPhone Upgrade Program. The old program was launched back in 2015 and was initially available for iPhones only, though it later expanded to include iPads and Macs. It had a 24-month payment plan that was typically around $42 per month and included AppleCare+ as part of the purchase. The program gave customers the flexibility to switch carriers since the phone wasn’t tied to any particular network through a contract, unlike traditional carrier financing plans.
Compared to the iPhone Upgrade Program, Upgrade’s coverage starts to look downright stingy, given that you’d be paying roughly $50 or more per month for a smartphone, just to use it for 12 or 24 months, then potentially having to pay more to keep it after that. On the other hand, the new purchase option through Klarna is much more broadly available across device categories, including the most popular iPhones, and features significantly lower monthly rates. What Apple’s new Upgrade Program lacks in features compared to the old iPhone Upgrade Program, it makes up for in lower rates and broader availability. The catch in Apple’s Upgrade Program is that you’re financing use of the phone, rather than purchasing it with monthly installments.
Consequences of Missing Payments Under the Apple Upgrade Program
The most significant catch in the Apple’s Upgrade Program terms and conditions is related to missed payments. If you miss three consecutive payments, your device will be terminated, meaning all future payments will be forgiven, but you’ll also be expected to pay off the remaining balance due on the device. Furthermore, Apple states that unpaid balances can be sent to collections.
This clause is where the controversy over the Apple Upgrade Program appears to stem from, as reports indicate that an Apple iPhone 27 update beta contained restrictions that could potentially lock a financed phone if a user were to miss a payment. The Verge has directly asked Apple whether a missed or defaulted Apple Upgrade payment would trigger a “Restricted Mode” for its iPhone 27 update, and apparently, Apple isn’t ready to admit that it even exists. It remains unclear what the “Restricted Mode” is actually for, since Apple has declined to comment directly on the matter. It’s possible that the “Restricted Mode” is related to other device financing methods used by corporate accounts, or by other device retailers and carriers.
Still, the mere fact that Apple has the capacity to potentially lock a financed device remotely is enough to raise eyebrows, given the controversy over similar clauses in India that ultimately led to several lending companies being banned by the Indian government. This may well explain why news of the “Restricted Mode” for iPhones financed through the Upgrade Program have caused such a stir, despite Apple’s initial denials about its existence.
Why You Should Care About Apple’s New Upgrade Program
Apple’s new Upgrade Program is aimed squarely at a specific type of customer, one who wants the lowest possible monthly payment and plans to upgrade every 12-24 months regardless of whether the current device still works fine. That kind of customer would find the lower prices and convenience of an automatic upgrade well worth the catch in Apple’s Upgrade Program. On the other hand, if you’re the type of customer who wants to eventually own the phone you’re financing, or who tends to keep their devices for longer than 24 months, the catch in Apple’s Upgrade Program is considerably more expensive in the long run. Especially for the iPhone, a four-year-old device can be considerably cheaper to finance through the installment purchase plan than through Apple’s new Upgrade Program.
Frequently Asked Questions
Do I own the device while I’m paying for it under the Apple Upgrade Program?
No, not technically. Ownership is transferred to you only if you make an additional payment at the end of your contract to buy the device outright.
Is AppleCare+ included in the monthly price with the Apple Upgrade Program?
No, it’s not. AppleCare+ is an optional add-on that’s separate from your Upgrade Program payments.
Will my phone get locked if I miss a payment?
No, according to Apple’s FAQ. The Verge has reported that the iPhone 27 beta contains a “Restricted Mode” for iPhones purchased through the Upgrade Program, which would prevent many apps and services from working when a payment is missed, but Apple has denied it.
Can I switch carriers on a financed iPhone under the Upgrade Program?
Yes, you can. Similar to the old iPhone Upgrade Program, the one through Klarna is device financing that doesn’t tie you to a particular carrier.
