Is the Apple Upgrade Program a Downgrade? ⭐

Say what you will about Apple, but it’s consistently offered high-quality hardware that lasts and is supported for years. And while the company mostly stuck exclusively to the premium end of whatever markets it competes in until fairly recently, you got what you paid for, and Apple’s prices haven’t been any higher than those of similar premium offerings from the competition. Plus, the value of the Apple ecosystem is an indisputable fact, with the one caveat that you need to buy a lot of Apple gear–and pay for Apple services–to see the biggest advantages.

Yes, there are multiple instances in which Apple had to be talked off the luxury cliff that doomed Steve Jobs’ NeXT, like the overly expensive and over-designed Power Mac G4 Cube, the initial luxury models of the Apple Watch, and the Vision Pro disaster it still hasn’t addressed fully. But there are also multiple instances in which Apple didn’t foist stupidly expensive products on unsuspecting customers, like the entire iPod range, the iPhone and Apple Watch SE models, and, most recently, the MacBook Neo. This could just be a byproduct of the company’s success, in that it has saturated the premium parts of the markets it competes in but still needs to find growth somewhere. But none of that matters. Apple has found ways over the years to open up its ecosystems of hardware and services to an ever-growing customer base that includes those who might otherwise be shut out financially.

Back in 2015, for example, Apple introduced the iPhone Upgrade Program as a way to lower the cost of purchasing its most popular product. This program was a byproduct of its time. Wireless carriers were moving away from the subsidized phone sales model that ensured customers who weren’t paying attention would continue paying monthly fees for a device they had already paid off. And the cost of buying an iPhone outright, then in a $650 to $950 range that we’d all love to have back today, was beyond the means of most consumers.

I really liked the iPhone Upgrade Program at the time because it solved the problems of the time. You could buy a new unlocked iPhone, pay a monthly bill, and then optionally get a new iPhone a year later and keep paying. Or, you could just keep using it, pay that bill for two years, and then own the device outright when that timeframe concluded. This program included the then-new AppleCare+ service, which raised the price overall but was an understandable requirement. In short, the Apple Upgrade Program made sense for Apple and for its customers at the time, and it was thus a good value. And, as important for this discussion, it was in keeping with Apple’s pursuit of quality.

Today, over a decade later, things have changed. Too many things. We have the AI infrastructure build-out that is ruining our industry and threatening to derail our economy and financial futures. We have the component crisis triggered by that AI build-out driving up prices everywhere, but most notably in our industry in PCs, phones, and other consumer electronics. And the transition into non-subsidized and unlocked phones is long complete, with customers now paying for phones over various timeframes through their carrier, or with iPhones, directly through Apple.

Seven years ago, Apple announced the Apple Card, an easily dismissed credit card serviced by Goldman Sachs that’s largely uncompetitive with the best rewards-based credit cards and initially seemed targeted at the most gullible of Apple fans. But Apple Card has some very Apple-y perks, like the absence of fees. And if you buy Apple hardware, you can space out the payment with Apple Card over one year with no interest. So that $999 iPhone or whatever costs $999, even if you took 12 months to pay it off. And then it’s yours at the end of that timeframe, of course. You bought it and there was no gotcha at the end.

I would never use Apple Card for anything other than Apple hardware purchases. But I do buy a lot of Apple hardware. So this perk has let me space out the payments if I need that, though I always pay off every purchase earlier–which you can do with no fees or extra costs–and often pretty immediately. I just like that this option is available, and if everything went south financially for some reason, I could take that full year to pay off some expensive purchase.

These things are tricky, of course. We live in a world of ever-escalating subscription services, which means we live in a world of ever-increasing monthly costs too. At some point, you get mad as hell and aren’t going to take it anymore, the inspiration for my ongoing An Inconvenient Truth series, which is about rejecting the convenience of all these services and introducing a bit of friction while lowering the monthly costs. There is also the sad reality of personal finances, where many people simply can’t afford expensive but sometimes necessary devices like a phone and have no other alternatives. And some people are just bad with money and get in over their heads financially as I did as a younger man. It’s all too easy.

Apple Card and other credit cards could be a bad choice for those folks, but you’d have to qualify for a line of credit in the tens of thousands of dollars. Apple’s newest offering, called Apple Upgrade, dramatically expands that net. That is, it’s going to be bad for far more people than is the Apple Card. And it’s not the clear win that the iPhone Upgrade Program was over a decade ago, though it, too, seeks to solve a major problem of its era. Everything is just too expensive now, and people can afford fewer purchases stretched out over more time. That’s bad for Apple. And so the Apple Upgrade program is a way to lessen the burden of purchasing hardware that is suddenly hundreds of dollars more expensive than its recent predecessors.

The issue here is that Apple Upgrade will only rarely be good for customers. So this is not always a good value, and it’s not that non-toxic relationship that benefits both parties. It’s not in any way Apple-y either: Apple Upgrade is a rent-to-own program–language Apple would never use–with an ongoing monthly cost, and when the leasing term is over, you don’t own the device. You can keep paying and get a new device, you can return it to Apple, or you can pay a relatively big fee–the remaining cost of the device–to buy it outright.

This is how car leases work, though that end-of-lease cost is usually higher. But it’s also how the rent-to-own industry works by targeting poor people who can’t afford to purchase anything expensive, whether it’s a couch or a TV or whatever else. It’s a way to gouge customers who buy a physical item that has value they can recoup should anyone stop paying. They can simply repossess the item and resell it. This is not like Apple, it doesn’t target the traditional Apple demographic, and it just feels off. If Apple is the Cadillac of consumer electronics, then Apple Upgrade is the Cadillac Cimarron of payment programs.

Apple Upgrade is a leasing program provided by Klarna, a company that’s perhaps best known for being a major source of identity theft and fraud. It offers low, low, low monthly prices on Apple devices like iPhones (as low as $17 per month) and Apple Watch ($11.9 per month and up). You can still trade in your existing devices at purchase time to lower the costs, which is good, but AppleCare+ isn’t part of this offering, and that could be bad. What is bad is the basic math. There are no fees or interest payments, which is only true until you get to the fine print, where the term “substantial fees” finally rears its ugly head. This is a classic rent-to-own program, one that benefits Apple and Klarna, and one that in many cases is not ideal for customers.

The substantial bit occurs when you can’t pay or if you can’t keep the device in mint condition. If you are good with money and take really good care of the devices you use–and are, in some ways, lucky–Apple Upgrade can make sense. The issue I have is that Apple Upgrade targets the people who are not good with money, the people who can’t afford these devices in the first place and now see this as their entry into this aspirational ecosystem.

The math is simple enough. That $17.99 per month fee for an iPhone is for the base model iPhone 17e that retails for $599. If I bought this device using an Apple Card, I would pay roughly $50 per month for one year and own it when I was done. If I bought it with Apple Upgrade, I would pay $17.99 per month for 24 months, a total of $435-ish over that period. But I wouldn’t own it, and I would have to pay the difference between the upfront cost and the amount I paid, so more than $165 for that iPhone 17e. There are no additional fees, yes, but it’s also two years later in this case, and the audience that needs to use this type of payment program is exactly the audience that cannot afford big one-time fees. This is designed to keep you paying every month forever. Which, again, is good for Apple and Klarna.

I know, the numbers above seem small. But that’s because we’re talking about one of the cheapest products in the mix. If you look at an iPad Pro like the one I recently bought, the costs get more sobering and less affordable to the target audience. But the low monthly cost is appealing and can trigger bad decisions. Worse, if you return the device when your payment period is over, you can owe Apple for damages if it’s not in mint condition. And there is no such thing as a three-year-old Apple device in mint condition unless you keep it in the box it shipped in. The solution? Keep paying.

For me, this would work out fine: The Apple Upgrade deal is a relatively low monthly cost, is spread out over two or three years depending on the device, and I could handle that end-of-lease payment. But I’m not the target market for this program. And while it’s fair to see this as a solution of sorts to escalating hardware prices that are beyond Apple’s control, it’s also fair to see this as nothing more than Apple victimizing an expanded base of its most vulnerable and in many cases new customers. This bothers me. Those people wouldn’t qualify for an Apple Card, so they couldn’t get into trouble. But they might qualify for a single lease of a single device.

Even when the math does work out, in which case we can view that transaction as a healthy one in which all sides realize the value, it’s bizarre that Apple now offers a rent-to-own program. This is not in keeping with the Apple that these people aspire to, and it’s not in keeping with the historic Apple premium vibe that suddenly feels like it’s crumbling around us as Apple seeks growth from ever less affluent customers. This reminds me of the Groucho Marx quip about not wanting to belong to a club that would have him as a member. It could get the people who just can’t afford these products in trouble.

That it arrives at a time in which we already have far too many monthly bills is perhaps the least Apple-y thing about this program. Apple has done a terrific job of entering existing markets and offering a solution that solves problems the existing competitors do not. This was the iPod, the iPhone, and the iPad, most obviously but AirPods and Apple Watch too. But Apple Upgrade is an ill-timed expansion in monthly fees aimed in part at those who can least afford such a thing. So instead of just solving a problem, Apple is also contributing to the problem.

Think about it. Apple now offers a rent-to-own program. That just doesn’t feel right.