'Apple as a Service' At Last

When Apple jacked up their prices across several products last month, there was a curious absence – a big one, the biggest one: the iPhone. As I noted at the time, it seemed like a strategy so as not to shock the system – read: Wall Street – all at once. The iPhone remains the most vital aspect of Apple's business, so while Tim Cook had already signaled – step one – the price increases were coming, pushing them first across nearly the entire product lineup aside from the iPhone clearly seemed like step two in this easement strategy.

Step three would likely be to announce the new iPhone pricing alongside unveiling the new premium iPhone models – including, for the first time, the 'iPhone Ultra', the first foldable, and undoubtedly most expensive, iPhone. And even that was clever/lucky since Apple has long been believed to be breaking up the iPhone launches starting this year, with the "regular" iPhones 18 coming in the Spring of 2027. And that would have been a step four of the strategy, since the buyers of the non-Pro devices are more likely to be price conscious. So Apple would have guided towards that outcome and postponed that pain as long as possible.

Well, as it turns out, this is a five step strategy!

Before that all-important step three of unveiling the new iPhones in September, Apple had a trick up their sleeve: a new way to pay! Say hello to Apple Upgrade:

Apple Upgrade offers 12- and 24-month leasing options for iPhone and Apple Watch, and 24- and 36-month leasing options for Mac and iPad. Leasing prices start as low as $17.99 per month for iPhone, $11.99 for Apple Watch, $24.99 for Mac, and $11.99 for iPad. When customers first enroll in Apple Upgrade, they can further lower their monthly lease payments by trading in their currently owned device through Apple Trade In. Customers can also earn 3 percent Daily Cash back when making their lease payments with Apple Card.

While Apple still didn't raise iPhone prices alongside this move, it's clearly another lever to pull getting ahead of that inevitable increase in a few weeks. Now a $100 or $200 price increase on the iPhone 18 Pro – perhaps soon to start at $1,299? – will look far less daunting when Apple can also tout the option to pay, say, $33.99/month.¹

And even better will be for those aforementioned "regular" iPhone 18 models coming in the Spring, which could start at just say, $19.99/month (again, assuming some increase in the monthly price alongside an actual iPhone price increase).

Apple, of course, has long had a way for some customers to pay for an iPhone monthly with the 'iPhone Upgrade Program', but as the name indicates, it was mostly geared around those who upgraded every year and allowed them to save a lot in terms of up-front costs and a bit in terms overall costs for a single iPhone – but with the rub being that they would have to pay in perpetuity!

Given that I upgrade my iPhone each year, I was an early member of this program, but found it a bit of a mess by Apple's standards, at least in those early days. A big part of that is because Apple partnered with a third-party bank on the financing element. For a while, it seemed like Apple would try to bring this all in-house as they slowly but surely grew their payments prowess with first Apple Card, and then their own 'Pay Later' service. But, well, both have been sort of a nightmare. Apple partnered with Goldman Sachs to launch the Card and the two quickly had a falling out and it took well over a year to find a new home with JPMorgan (which is still in process). Meanwhile, Apple Pay Later only made it a year before they pulled the plug entirely, seemingly not enjoying holding the debt on their balance sheet. So much for the Apple Bank!

Apple went back to partnering. And they're doing so here as well, with Klarna. And yes, the iPhone Upgrade Program is going away.² This is a far more robust offering for more Apple products. Yes, you can still do the monthly installment option with Apple Card, but that's only that card and that's only to fully buy the device over time.

Anyway, as someone who has long been on the lookout for an 'Apple Prime' or 'iPhone Prime' offering – that is, a way to "subscribe" to pay for your iPhone just as you subscribe to Amazon Prime – this is the closest thing yet. Yes, Apple has the 'Apple One' subscription but it only bundles their software offerings, not the iPhone (or any other hardware). Still, it seemed inevitable given the ever-rising costs of the iPhone, as Apple pushed more and more premium models. And now it's here, a true 'Apple-as-a-Service'.

Yes, it would be a bit nicer to rope this into Apple One itself. Or for it to be fully run through Apple without any partners needing to do third-party credit checks and whatnot. But Apple will presumably make this as seamless as they possibly can. Because again, I think it's a big part of their strategy to alleviate (and in a way, obfuscate) the price rises that have been forced upon Apple by the current market dynamics.

One imagines we'll see that familiar iPhone pricing slide during Apple's next keynote – the first undoubtedly to be fully MC'd by John Ternus – but with a new element: "the iPhone 18 Pro starts at just $1,299 or you can sign up for 'Apple Upgrade' and pay just $33.99/month for 24 months (or more if you want a 12 month term). And at the end of that term, you can opt to pay a bit more to buy the device outright, or simply choose a new model! This will be offered in the US to start, but we're working to bring it to other parts of the world soon."³

And just like that, Apple will have kicked 'AaaS' out the door. Curious to see how they account for this – literally. Do they still book the full device price at time of sale, or just the portion covered by the lease? It then perhaps technically becomes Klarna's iPhone for which to collect the monthly installments? Or is it some sort of hybrid?

But that's too in the weeds. For consumers, this will just look like you can buy an iPhone (or Mac, or iPad, or Apple Watch) from Apple for a relatively low monthly fee. And given where Apple's prices are heading, that's going to look awfully enticing to many.

¹ Unless Apple already baked-in the upcoming iPhone price increases into these monthly rates? It's possible but probably unlikely? That would be a nice "surprise" though if they don't have to raise these just-announced monthly prices! ↩

² And with it, sadly, the inclusion of AppleCare in such programs, it seems. That will be extra. Services, FTW (for Apple's bottom line). ↩

³ Which may be a part of why they picked Klarna here, a company headquartered in Stockholm but that operates in the US as well... ↩