Please ensure Javascript is enabled for purposes of website accessibility

Apple Expands Monthly Installments to Just About Everything

By Evan Niu, CFA – Jun 16, 2020 at 8:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

At least if you have an Apple Card.

"But as you know, having access to the Card, at least in the United States, gives us more degrees of freedom, and that is not using our balance sheet," Apple (AAPL 0.23%) CEO Tim Cook said on the last earnings call. "But we play a key role in deciding what kind of programs go with the Card."

The chief executive was responding to an analyst question regarding using Apple's balance sheet to offer financing plans for more products following the launch of a new iPhone financing plan in December. Cook teased that the company was "working on doing that for other products as well."

Physical Apple Card

Apple Card is issued by Goldman Sachs. Image source: Apple.

Installment plans for everything

This week, Apple introduced new financing plans for other devices including Macs, iPads, and even lower-cost accessories like AirPods, in line with Cook's comments, as well as a recent Bloomberg report that said such a move was imminent. You can even finance keyboards or Apple Pencil styluses through Apple Card.

The monthly installment plans allow customers to spread out the cost of new hardware purchases with no interest for varying terms that range from six months to two years. Installment plans are a time-tested way to make big-ticket purchases more affordable, thereby boosting demand.

As Apple has been slowly ratcheting up its prices across the board in recent years -- the new Mac Pro can be configured to cost over $50,000, for instance -- installment plans will offer considerable flexibility for consumers.

Separately, Apple still offers its co-branded credit card issued by Barclays, which also has a promotion for no-interest financing for up to 18 months, depending on the size of the purchase. Much like Apple Card, which is issued by Goldman Sachs, the Barclays card doesn't use Apple's balance sheet, either.

There is no Bank of Apple

Apple has never used its own balance sheet to provide financial backing to any of these types of programs, despite the fact that the Cupertino tech giant is sitting on $193 billion in cash. Even the iPhone Upgrade Program, introduced almost five years ago, is backed by Citizens Financial.

There are several key benefits to this approach of outsourcing these underlying credit operations. For starters, Apple is able to recognize the related revenue immediately up front instead of having to defer revenue recognition. On top of that, the company doesn't have to take on any credit risk or deal with any of the hassles of running a financial institution, such as estimating loan losses or maintaining regulatory reserve requirements, among others.

Apple is not a bank and has no interest in becoming one. (Well, unless it's trying to strong-arm a supplier.)

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$150.77 (0.23%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.