Apple has introduced a new device leasing program, the Apple Upgrade program, which allows consumers to lease iPhones and MacBooks for a monthly fee in partnership with the "buy now, pay later" giant Klarna. This program enables users to obtain new devices for a lower monthly cost compared to installment plans, but it raises questions about the long-term implications of device ownership and financial commitment.
Under the program, consumers can choose lease terms of 12, 24, or 36 months, depending on the device. Unlike traditional purchase plans, customers do not own the device at the end of the lease term unless they pay the remaining retail price in a lump sum. This model has drawn comparisons to rent-to-own services.
To participate, customers undergo a soft credit check by Klarna. Critics have previously accused Klarna of insufficient underwriting practices. Failure to make three consecutive payments can result in the termination of the lease agreement and potential collection actions. Apple has confirmed that leased devices will not have their functionality limited due to missed payments, though early termination fees apply if a user wishes to end the lease prematurely.
Experts suggest the program might not be a financially advantageous deal for consumers. "I don’t think people are getting a good deal here," stated Aaron Perzanowski, a law professor at the University of Michigan and author of "The End of Ownership: Personal Property in the Digital Economy." He posited that if the deal were significantly beneficial, Apple would likely not offer it.
Economic Context and Consumer Choices
The introduction of the leasing program comes amid broader economic concerns, including rising prices, inflation, and job insecurity amplified by advancements in artificial intelligence. These factors are increasingly leading consumers to utilize "buy now, pay later" services for essential purchases.
The Apple Upgrade program offers a potentially cheaper entry point for consumers who regularly upgrade their devices or who might otherwise find it difficult to afford Apple products outright. The monthly leasing fee is presented as lower than that of installment plans for purchasing devices.
However, the shift from ownership to leasing is seen by some as a move away from consumer independence. "What ownership ideally gets us is independence," Perzanowski explained. "It gives us autonomy. It gives us the ability to function in the world without relying on third parties." Leasing, conversely, ties consumers more closely to manufacturers, potentially giving them greater control over user behavior.
Apple's Strategy and Historical Precedents
From Apple's perspective, the leasing program serves as a customer acquisition strategy. By lowering the barrier to entry for its ecosystem, the company aims to increase the number of users who subscribe to its services, such as iCloud, which has become a significant revenue stream. This model allows Apple to extract ongoing profit through lease payments and subscription fees.
Installment plans and leasing are not new concepts in consumer electronics. Historically, similar models have been used for appliances and vehicles. Cellular carriers have also frequently subsidized phone purchases through service contracts. Apple itself previously offered a loan program through Citizen One Bank that allowed for device upgrades, with payments including AppleCare and an option to trade in devices every two years.
Most current carrier plans offer interest-free installment options to purchase devices, which ultimately lead to ownership. The key distinction of Apple's new lease program is that it does not lead to ownership unless the remaining retail price is paid off. This means that consistently renewing leases could potentially result in higher overall spending compared to purchasing a device outright over the same period.
While the program may offer a more accessible way for some consumers to access new technology, especially those who prioritize having the latest devices, potential drawbacks include long-term costs, financial commitments tied to Klarna, and the relinquishing of ownership benefits such as the ability to repair, sell, or independently use the device without ongoing monthly payments.