Apple has launched a leasing program in partnership with Klarna. While Apple has experimented many times in the past with device finance options, this time may be different.
Firstly, let’s look at the issue Apple is trying to address. The US market recorded lowest device upgrade rates in last 3 years with the device lifecycle inching closer to 40+ months. The US carriers are posturing more controlled and targeted device subsidies in 2026, rather than broad based offers for switchers and upgraders. Even though carriers are raising subsidies with discounts going as high as $1,300, the reconciliation shows that headline offers on flagship launches stay aggressive while aggregate subsidy dollars are squeezed. It means subsidies are not disappearing, it is becoming concentrated and conditional. The subsidies are now more targeted to specific unlimited tiers with tighter eligibility for the existing base. It’s clear that carriers want to retain and attract high value subscribers rather than focusing on just subscriber number growth.
In the week of 22nd July, all three US national carriers reported Q2 2026 earnings. The story was same across all carriers, i.e. growth is now coming from pricing, convergence and retention economics rather than from handset subsidies.
- Verizon was the most explicit in terms of direction. Their equipment revenue fell nearly 20%, more than $1.2bn year over year, on upgrade volumes down about 27%. The company attributed that to customers holding devices longer and to what it called a strategic decision to reduce spending on device subsidies. Promotional acquisition costs fell roughly 15% year over year and promotional retention costs about 17%, while the quarter still delivered 184,000 postpaid phone net adds and a record 40.1% adjusted EBITDA margin. Verizon has now demonstrated it can grow subscribers while spending less on devices, which retires the strongest historical argument for heavy subsidy.
- AT&T grew wireless service revenue 3.3% on 432,000 postpaid phone net adds and credited customer growth plus pricing actions taken during the quarter, not device promotion. It raised postpaid phone ARPU while cutting churn to 0.86% and posted a 39.1% adjusted EBITDA margin, its highest since refocusing the business on advanced connectivity.
- T-Mobile beat on EPS and guided third-quarter postpaid net adds to roughly 250,000, below the second quarter. Morgan Stanley and Bank of America both pressed management on whether it can keep raising prices without leaning on subsidies. The answer was that the business is increasingly driven by CLV (customer lifetime value) and network strength rather than promotional offers.
However, despite the net adds subscriber growth, purchase of new devices is expected to go down as the subsidies get more optimized. As per Recon Analytics survey, device subsidies was selected among Top 4 reasons for buying a new device.
Now while the carriers are trying to control the subsidies, the price of devices are going up, especially with price of memory rising upto 300% for premium devices in just 12 months. This is causing further divergence between controlling the cost of subsidies and selling more devices.
So, the solution is to partially move the cost of subsidies elsewhere. And Apple has had several attempts at this in the past with iPhone Upgrade Program (2015), Apple Card Installments (2019), Apple Pay Later (2023), but this time it’s different. Because with third-party financing with Klarna, Apple has created a parallel channel that holds monthly payments low and lowers the device lifecycle without the cost of financing going to Apple or the carrier’s balance sheet.
As per Recon Analytics survey data on wireless channels, over 85% of the US consumers prefer buying from carriers directly, while only 15% prefer buying directly from third-party store or website. The third-party includes the big box retail as well as independent OEM stores & website. In a separate survey on store visitations, 5% indicated they visit Apple store for wireless needs. While apple store remains a smaller channel in larger market structure, it’s still significantly important to open a new channel with faster device upgrade option to consumers.
Source: Recon Analytics US consumer survey (Nov 2023 to April 2025, n = 59,920)
Source: Recon Analytics US consumer survey (April 2025 to June 2025, n = 59,920)
Impact on Carriers
So far, Apple hasn’t opened the leasing program to prepaid, MVNOs, or cable carriers. Paying in full, a consumer can buy an unlocked device and activate with any carrier at checkout. Under the lease, that choice narrows to Verizon, AT&T, or T-Mobile postpaid at signing. Notably, Apple Card Monthly Installments includes Boost Mobile and the lease program does not, which points to a negotiated agreement likely priced on activation volume.
It means the activation is still gated, but Recon Analytics confirmed with Apple sales specialists that consumers can switch carriers once the lease is executed, and the payment is owed to Klarna regardless of who provides service. The door to churn over to cable and prepaid is open under this program. What Apple still controls is the checkout gate and adding one name can have a significant impact.
Why it works for Klarna
The core mechanics behind a lease is that an installment plan amortizes the full price whereas a lease amortizes only capitalized cost minus residual, plus it charges a rent on the money at risk. The customer funds roughly half the asset’s economic life and pays rent on the rest. The chart below shows that on $35/month on Apple iPhone 17 Pro Max retailing at $1199 before tax. A consumer will pay $840 in 24 months (i.e. 70% full price) while the residual value of the device is still at $621 (based on ‘retail’ prices trends in refurbished market for iPhone 15 Pro Max). That gap creates the value for Klarna.
Meanwhile, Apple’s largest gain is cycle compression, not margin. Klarna earns net interest margin, Furthermore, Klarna also sold $1.2bn of those receivables in the quarter, so it may not be the ultimate holder of this paper at all. A win-win for all.