Apple today officially announced its Apple Upgrade leasing program, and it works in the way we expected. While it does make products more affordable on a monthly basis, it leaves people at risk of being trapped into a never-ending lease cycle.

That’s because, unlike the iPhone Upgrade Program it partly replaces, you don’t own the device outright at the end of the term …

With Apple product prices higher than ever, there’s no arguing with the fact that there’s an appeal to making devices more affordable. The Apple Upgrade program certainly achieves this when looking solely at the monthly payments.

For example, you can lease a MacBook Pro with 16GB memory and 1TB storage for as little as $38.99 per month. This approach brings more Apple devices within reach of more consumers, and this aspect of it is for sure a good thing.

The danger, however, is the one I anticipated last week: that people will use this program in exactly the same way as a car lease. While you have the option of making a balloon payment at the end of the lease term in order to own the car outright, almost nobody does so. The vast majority of those leasing a car return it and lease a new one, starting the cycle all over again.

The same thing could happen with the Apple Upgrade program. In order to own the product outright, you have to make a balloon payment equal to the difference between the total lease payments you’ve made and the full initial retail cost of the device.

Let’s see how that would work with the MacBook Pro referenced above (rounding the totals to the nearest dollar):

• Monthly payment: $38.99
• Total paid over the term: $1,403
• Balloon payment needed to own the machine: $585

• Monthly payment: $53.99
• Total paid over the term: $1,295
• Balloon payment needed to own the machine: $703

For someone who can’t afford to buy the machine outright, those are significant amounts to find. Unless they’ve been setting aside the difference during the term of the lease, the chances are that they will struggle to pay it. The more likely outcome, then, is that they’ll begin the cycle again.

If you can afford a higher monthly outlay, the smart approach would be a DIY conversion to the equivalent of the IUP.

You pay Apple the lease amount, and simultaneously make a monthly payment into a savings account to cover the balloon payment at the end. For that 36-month MBP lease, for example, the sums would look like this:

• Monthly lease payment: $38.99
• Monthly payment into savings account: $16.26
• All-in monthly cost: $55.25
• Total paid to Apple: $1,403
• Total saved for balloon payment: $585.36 (plus any interest earned)

You then using your savings to pay off the $585 due and the machine is yours, free and clear.

Of course, if you do want to upgrade to a new machine, then there’s absolutely nothing to stop you selling the machine you now own and taking out a new lease. The amount you’ll get from a private sale will likely more than cover the new balloon payment, so you can simply stick this directly into a savings account and have only the lease cost as your new monthly outgoing.

What do you plan to do to finance future Apple products? Please share in the comments.

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