GoKawiilApple customers in the U.S. will soon be able to lease an iPhone for up to two years at a price starting at $17.99 per month, the company announced on Tuesday.
The program, called Upgrade, is a partnership with Klarna , a provider of buy now, pay later loans, that will be offered at Apple's physical retail stores as well as its online store. After passing a soft credit check, customers will be offered a one- or two-year lease on an iPhone. There will be a similar option for an Apple Watch, or a two- or three-year lease available for Macs and iPads.
The announcement comes a month after Apple, citing the global memory crunch, raised starting iPad and Mac prices by at least $100, with some models increasing by more than $1,000. Analysts expect iPhone price hikes this year and say that leasing lets Apple shift the focus from a higher up-front sticker price to a lower monthly payment.
"Most of Apple's consumers, especially in the U.S. and other developed markets, are buying devices on installment plans or trade-ins, so we can expect to see much more aggressive offers," Nabila Popal, senior research director at IDC, told CNBC in an interview after the company signaled price increases in June.
Apple is looking for new ways to offer iPhones through installment payments, a strategy that investors have long thought can help smooth the seasonality of the business and reduce the company's reliance on hit device cycles for growth. The new program could also encourage customers to replace their devices sooner, with the average iPhone replacement cycle having stretched to nearly four years, according to Bernstein estimates.
As a lease, devices will have to be returned at the end of 24 months. Users can also purchase their phone at that time with an additional payment, or upgrade to a new device. No security deposit is required and, while Klarna won't charge late fees, it will terminate leases after three months of missed payments.