Apple Hands Its iPhone Financing to a Battered Klarna

Apple’s newest way to pay for an iPhone still carries Apple’s name. The loan behind it belongs to Klarna, a buy now, pay later lender trading at less than half its IPO price. Apple Upgrade launched Tuesday, replacing the decade old iPhone Upgrade Program with device leases run entirely through Klarna’s app. Prices start at $17.99 a month for an iPhone, $11.99 for an Apple Watch or iPad, and $24.99 for a Mac.

The lower prices are real. So is the fact that Apple just outsourced the credit risk, the missed payment calls and the collections process. The company holding that risk is a fintech still recovering from a rough post IPO stock slide, reviving a lending business Apple itself abandoned in 2024.

A Decade-Old Financing Program Gets Replaced

Apple Upgrade opened to shoppers in the United States on July 28, taking over for the iPhone Upgrade Program and iPhone Payments, both now closed to new sign ups. The program leases iPhone, iPad, Mac and Apple Watch models directly through Klarna, the payments company known for its buy now, pay later button on thousands of other retail checkout pages.

Leases run 12 or 24 months for iPhone and Apple Watch, and 24 or 36 months for iPad and Mac. Customers manage billing entirely inside Klarna’s app, where they can check a payment schedule and remaining balance. Paying with an Apple Card earns 3% Daily Cash on lease payments, the same reward rate Apple pays on other Apple Card purchases.

Trading in an old device lowers the monthly bill further, though the credit is spread across the lease’s payments rather than deducted upfront. That is a departure from how most carrier trade in deals work, and it slows down how quickly a shopper feels the savings.

Why Apple Picked a Wall Street Question Mark

Klarna priced its IPO at $40 a share on September 9, 2025, then watched shares open at $52 the next morning on the New York Stock Exchange under the ticker KLAR, a jump of more than 30%. The stock closed its first day at $45.82, valuing the company near $19.65 billion.

The rally did not hold. By mid-June 2026, Klarna shares were trading around $17.66, roughly 56% below the IPO price and about 66% below where they opened.

• $40 – Klarna’s IPO price on the NYSE last September
• $52 – the opening trade, a jump of more than 30%
• $19.65 billion – Klarna’s valuation by the close of its first trading day
• $17.66 – roughly where shares sat by mid-June, about 56% below the IPO price

A marquee partner like Apple gives Klarna a chance to prove its lending model can carry premium hardware alongside its usual mix of clothing, concert tickets and appliances. It also hands Klarna underwriting responsibility for a customer base Apple spent two decades cultivating.

Apple has not fully left the lending business itself. Apple Card holders can still finance a new iPhone at zero interest through Apple Card Monthly Installments, a separate option that leaves the buyer owning the device outright instead of leasing it. Apple Upgrade, and its credit risk, belongs to Klarna instead.

Apple Already Ran This Experiment, and Folded

Apple tried building its own lending product once before. Apple Pay Later launched inside Apple Pay in 2023, letting shoppers split purchases into four payments with no interest, funded through Apple’s own balance sheet. Apple shut the service down in June 2024, after about a year.

It replaced Apple Pay Later with partnerships tied to Affirm and Citi instead of building its own book of loans. Affirm became available as a financing option at Apple Pay checkout for qualifying iOS 18 users that September.

Regulators had just raised the cost of running a lending arm directly. In May 2024, the Consumer Financial Protection Bureau issued a rule treating buy now, pay later loans more like credit cards, requiring dispute rights and refund protections. Independent analyst Neil Cybart, who covers Apple through his own research site, described the shutdown as a limit to Apple’s fintech ambition.

Two years later, Apple Upgrade shows that limit still holds. Apple wants the hardware sale and the customer relationship. It does not want the loan sitting on its own books.

Klarna Reports These Leases as Loans

Klarna’s shortest product, the four payment Pay in 4 plan, generally does not appear on a credit report when payments are made on time. Longer installment plans work differently. Klarna’s six, 12 and 24 month financing products typically report to Experian and TransUnion as installment loans, the same category Apple Upgrade’s 12 to 36 month leases fall into.

That means an Apple Upgrade lease can build or damage a credit history much like a car loan does, a detail easy to miss beneath Apple’s marketing focus on lower monthly prices. A single late payment on its own usually will not trigger a bureau entry, since missed payments simply roll into the next bill under Apple Upgrade’s terms. An account sent to collections after three consecutive missed payments will, and Apple has said missed payments can affect a customer’s credit score even though no late fee applies.

Who Gets Left Out of Apple Upgrade

What Apple Upgrade Will Not Lease

Seven current Apple products cannot be leased through Apple Upgrade at all. Apple has not explained why these specific models are excluded from the program.

• iPhone 16 and iPhone 16 Plus
• Apple Watch SE
• MacBook Neo and Mac mini
• The entry level A16 iPad
• Studio Display

Two other doors stay closed too. Apple Upgrade does not support education pricing, so students and teachers lose the usual discount if they lease instead of buy. Refurbished devices are not available through the program either, only new units.

Ending or Buying Out a Lease Early

Paying off a lease ahead of schedule carries no penalty, and Klarna closes the account once the balance clears. Customers who want out before a lease term ends have to pay off the remaining balance first, then return the device.

Reaching the natural end of a lease term is simpler. A customer who completes all scheduled payments can return the device to move into a new lease, or pay the leftover balance, the original device cost minus what has already been paid, to keep it. Trade ins are allowed when a lease starts, lowering the monthly bill, but not when a device is returned at the end of one.

Klarna also does not accept every card at checkout. American Express, Chase and Capital One cards are all declined for Apple Upgrade payments, though Apple Card and most other bank issued cards work fine.

What Happens If You Miss a Payment

Missing one payment on an Apple Upgrade lease rolls the amount into the next bill, with no late fee attached. Missing three in a row is different. Klarna automatically ends the lease, the full remaining balance comes due immediately, and an unreturned or unpaid device can be sent to collections.

Returning the device lets Klarna subtract its assessed value from the balance owed, shrinking what a customer actually has to pay. Damage to a returned iPhone adds a repair charge on top, unless the lease included AppleCare+, in which case only the AppleCare+ service fee applies. AppleCare+ is no longer bundled into the monthly lease price the way it was under the old iPhone Upgrade Program. It costs $9.99 to $13.99 a month per iPhone on its own, or $19.99 a month for AppleCare One, which covers three devices at once.

One consequence will not happen. Code found in the iOS 27 beta suggested Apple built a way to restrict apps and services on a device with missed lease payments. Apple Upgrade does not use it. A missed payment changes nothing about how the iPhone actually works, at least for now. The capability already exists in Apple’s own code. Whether it ever gets switched on is Apple’s decision, not Klarna’s.

Frequently Asked Questions

Is Apple Upgrade Available Outside the United States?

No. Apple Upgrade launched only in the United States on July 28, and Apple has not announced a timeline for bringing the leasing program to any other country. Shoppers elsewhere still have to rely on local carrier installment plans or other financing options.

Does the Apple Upgrade Credit Check Hurt Your Credit Score?

No. Klarna runs a soft credit check to approve an Apple Upgrade lease, which only appears on a personal credit file and never affects a credit score, unlike the hard inquiries some carriers run for their own installment plans. That distinction matters for anyone comparing financing options before committing to one.

What Credit Score Do You Need to Qualify for Apple Upgrade?

Apple and Klarna have not published a minimum credit score for approval. Underwriting runs through Klarna’s own model, the same system it uses to evaluate its retail buy now, pay later loans, rather than a fixed score cutoff shoppers can check in advance.

Can You Upgrade to a New iPhone Before Your Lease Ends?

Yes, but it counts as ending the lease early. A customer who wants a new iPhone before finishing scheduled payments has to pay off the remaining balance on the current lease and return the device, the same process required to exit Apple Upgrade entirely. Waiting until the lease term is complete avoids that payoff requirement, since returning the device at that point is enough to start a new lease.

Disclaimer: This article is for informational purposes only and is not financial or credit advice. Leasing terms, pricing and credit reporting practices can change, so confirm current details directly with Apple or Klarna before signing a lease. Figures are accurate as of publication on July 29, 2026.