Ask Jean: “I see Apple is launching a new option for leasing iPhones. Does it make sense financially?”

Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.

Q: “I see Apple is launching a new option for leasing iPhones. Do you think doing so makes sense financially?”

A: We all know the deal with leasing a car – lower payments now, but you don’t actually own it. Turns out, Apple wants in on that model too.

The company just launched Upgrade, a lease-to-own program (in partnership with Klarna) that lets you lease an iPhone, Apple Watch, Mac or iPad for one or two years, starting at $17.99 per month (though you can reduce your monthly payment if you’re trading in your existing Apple device). The program comes on the heels of Apple warning that prices for its technology are climbing thanks to a global memory chip shortage.

Here’s the gist: after a soft credit check, you lock in a flat monthly payment. When your lease ends, you have three options – buy the device by paying the remaining balance, hand it back and walk away, or upgrade to a new device and start a new lease. While it sounds flexible, there are a few things would-be lessees should be aware of:

You don’t own the phone; Klarna does: Damage it or return it in poor condition and you’ll get hit with fees. Apple even nudges customers toward an AppleCare subscription (starting at $9.99 per month) to protect against that, which inflates your total monthly bill.

Miss three payments in a row, and the deal’s off: Per Klarna, if you miss three consecutive payments, they’ll “terminate the lease agreement and the customer will need to pay the full outstanding balance.” And if you can’t? The debt will be transferred to a debt collection agency. 

There are fees: Want out early? You’ll owe an early termination fee equal to whatever payments you have left. The same logic applies if Apple drops a new device mid-lease and you want the latest model – you’ll hand back your current phone, sign a fresh lease, and cover an upgrade fee for your remaining balance. 

At the end of your lease, upgrading instead of buying could mean leaving money on the table: Say you lease an iPhone 17e for two years with payments at $17.99 per month – a total of $431.76. The purchase cost, to own the phone outright, is $599 – meaning there’s still $167.24 left to pay. If you skip buying and upgrade instead, you’re going to lose out on whatever you could’ve pocketed by selling or trading in that phone. 

Bottom line? Serial upgraders – the people who want the shiny new model every time a new iPhone drops — may find real value here, since, much like vehicles, electronics do lose value the moment you unbox them. Continually leasing sidesteps that depreciation hit, while keeping payments low and interest-free – plus you’re free to pair your device with whatever cell carrier you like.

That said, most people keep their phones for around 3.5 years before replacing them, so if your goal is to eventually own a device outright, don’t expect leasing to save you a dime. You’re on the hook for the same total cost, just stretched out. Lastly, if being tied down by upgrade fees and “good condition” requirements sounds like a hassle, buying outright is still your better bet.

MORE ON HERMONEY:

• Ask Jean: “Should I Buy Used Luxury Items?”
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• Ask Jean: “What Do You Do When Your Dream Job Doesn’t Come With Your Dream Salary?”

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