An iPhone for $17.99 a month or an Apple Watch for $11.99 a month may sound like a deal too good to pass up. Apple's new Apple Upgrade program offers appealing, low monthly payments on Apple devices — so affordable, in fact, that some consumers may be asking, "What's the catch?"

Here is how the new Apple (AAPL) payment program works and what experts say to consider before enrolling.

How the Apple Upgrade Program Works

Apple Upgrade is a hardware-leasing agreement that replaces Apple's prior purchase-based installment program. Consumers can obtain iPhones and other Apple products with a 12- or 24-month lease online, through the Apple app, or at Apple Stores in the U.S. Apple Watches are offered with 24- and 36-month lease options.

Lease payments can be reduced by the trade-in value of an existing Apple device.

The program is facilitated by Klarna (KLAR), the buy-now-pay-later company. Klarna processes a credit application using a soft credit pull that does not affect the applicant's credit score. The partnership marks Apple's return to BNPL-style financing after the company discontinued its in-house Apple Pay Later service in 2024.

Entry-level Apple products — including the iPhone 16, iPhone 16 Plus, Apple Watch SE, MacBook Neo, Mac mini, iPad (A16), and Studio Display — are not available through the Apple Upgrade program.

Apple Upgrade Leasing Terms

Apple provides the following example of a lease on an iPhone 17 Pro 256GB with a purchase price of $1,099:

• 24-month lease: $31.99 per month
• 12-month lease: $45.99 per month

All prices exclude taxes, any trade-in credit, and an AppleCare (device insurance) subscription.

Under the 24-month lease example, total payments would amount to $767.76. To purchase the phone at the end of the lease, a one-time residual payment of $331.24 — the balance remaining on the original purchase price — would be required. The calculation: $1,099 − $767.76 = $331.24, again excluding taxes and any trade-in credit.

Apple states that consumers will not pay more than the device's original list price when leasing it.

End-of-Lease Options

At the conclusion of the lease term, customers can:

• Purchase the device with a one-time residual payment;

• Upgrade to another device; or

• Return the device.

Cancellation

An Apple Upgrade lease can be canceled, but Apple warns that "you may incur substantial fees if you terminate your lease before the end of your initial lease term."

Carrier Plan Requirement

A carrier option is required at checkout. However, customers can switch service providers at any time, subject to carrier restrictions. Prepaid carrier plans are not accepted.

Alternative: 0% Financing with Apple Card

For consumers whose financial goals are better served by outright ownership — and who are willing to carry an additional credit card — the Apple Card offers an alternative 0% financing option. The Apple Card provides monthly installment payments with no interest charges, subject to credit approval and credit limit. Cardholders can also earn 3% cash back on Apple purchases.

How Apple Upgrade Differs from the Former iPhone Upgrade Program

The new leasing program may confuse some consumers, as Apple has long financed iPhones through a down payment followed by monthly installments, after which customers owned their devices outright. That arrangement — the old "Apple Upgrade Program" — is being discontinued. Existing customers will continue making their current payments until their devices are fully paid off.

Major carriers such as AT&T and Verizon also finance iPhones, providing another option for comparison.

On social media, one consumer reported purchasing an iPhone 17 Pro for $65.33 per month under the old Apple installment program, which included AppleCare+ protection. "For the same phone, the 12-month lease is $54.36 + $13.99 a month for AppleCare+, so $69.35 a month if I want to stay on an 'annual upgrade' cadence. Slightly more expensive," he noted. However, that comparison may not account for the down payment under the purchase plan or the residual payment required at the end of a lease.

Payment options shown in an Apple screenshot published by 9to5Mac also revealed minor cost differences.

What to Consider When Leasing Technology

Apple Upgrade may appeal to consumers who prefer to update their devices frequently and value lower monthly payments over ownership. The program offers a payment below the retail list price and allows upgrades every one to two years. The launch comes as BNPL services face growing regulatory scrutiny, with the Consumer Financial Protection Bureau moving to treat BNPL lenders more like traditional credit card providers.

However, experts caution that lower monthly payments are not the only factor to weigh.

"As with most big purchases, it's always best to buy outright if you can afford it," Thad Hwang, founder and CEO of Goji Mobile, told Yahoo Finance. "That said, many people don't have a spare $1,000 or more lying around to buy a phone outright. Major carriers have offered similar lease-to-own options for years, but Apple's is unique with the no money down, 0% financing, and lump-sum final payment."

Hwang also highlighted the 0% financing available through the Apple Card as an attractive alternative.

Stoy Hall, a certified financial planner® based in Iowa, said leasing technology is not automatically a poor decision, but cautioned that lower payments alone should not drive the choice.

"The biggest problem is not one $32 or $42 payment, it's what happens when that gets stacked on top of the car payment, streaming services, buy-now-pay-later purchases, credit cards, and every other 'small' monthly charge people barely notice," Hall said.

For most people, the more prudent financial move is to purchase a device they can afford and keep it longer, Hall added.

Source: Yahoo Finance