
Your Phone Loses Value Pretty Fast (Unless It's an iPhone) - omarish
http://priceonomics.com/phones/#cell-phone-depreciation
======
hackoder
The thing with lumping all 'Android' together is that it gives the wrong
picture. Similar to lumping all PCs.

When you buy anything non-Apple, you have to be a smart buyer. This can be
good or bad, depending on your world view.

If you compare premium non-Apple brands, they compare favoribly to Apple. For
example, my Nexus S was $300 off contract (brand new). This is much cheaper
than the comparable iPhone 4 at that time, retains good resale value, and will
probably be fast enough/supported for as long as the iPhone 4. On the PC side,
ThinkPad T/X series offers similar (or even better!) reliability/cost
effectiveness/resale value to MacBooks. For example, the x220 series
configured new at lenovo will cost ~1000. Current resale puts it at around
800, which is better than the MBP (for e.g. base at $1249, refurb @ apple for
$1049, and resale at around $950).

~~~
sjs
Even if you break out Samsung, Motorola, HTC, etc. you will still have the
same problem within each manufacturer's lineup. Comparing individual phone
models is logical but nobody does it for some reason.

It seems that people always want to compare the iPhone (a single hardware
line) to Android (software) which is just bizarre.

~~~
alsocasey
Resale value is also being measured as a percentage MSRP, which makes sense
for the iPhone, as it isn't really available for anything but MSRP, but isn't
as realistic for most Android phones that can often be had for less than MSRP.

~~~
schraeds
So Android phones lose value just sitting on the shelf.

------
Gormo
> At Priceonomics, we firmly believe that resale value is the best objective
> indicator of product quality.

Really? It might be a decent indicator of product quality relative to other
products on the market, but even then, plenty of extrinsic factors - from
speculative bubbles to the lack of knowledge of longer-term product quality -
can influence the perceptions of relative value that drive market prices.

That aside, how indicative of the overall market for phones is the specific
segment of those who buy second-hand phones? Unlike houses or cars, few people
actually buy used phones, and those who buy new phones aren't usually thinking
about resale price at their initial time of purchase.

Does resale price really say a lot about the underlying product quality of a
mobile phone?

~~~
thedufer
High resale value seems like it would correlate most strongly with high
initial cost and high popularity - more people would prefer to buy a used one
if the initial cost is higher since they can't afford the initial cost, so
both increase the demand. Android/Blackberry popularity is spread over many
more models than the iPhone, and are usually cheaper.

"We firmly believe", on the other hand, is not an indicator of anything.
"We've defined quality in such a way that" would be more apt - quality is a
hard-to-define term, and they don't even try.

------
pragmatic
One explanation: The rapid rate of change in Android phones vs Iphones?

Consider if a car company released 4 model updates per year instead of one.

Your Hyandai 2013 Quarter 1 would depreciate faster as the 3 newer models came
out (granted that each new model would have more/better features - heated
seats, leather, auto drive, whatever).

So as an iPhone buyer/owner, you know your phone will be state of the art for
foreseeable future, where as with Android, you phone will be (perceived
anyway) as antiquated, much more rapidly.

~~~
RyanMcGreal
20 months ago, I paid a lot of money for my Android phone when I signed on for
a three year contract. Just a couple of weeks ago, my wife replaced her phone
and got an Android phone for free with her contract. Her phone is lighter,
faster and slicker than mine and has significantly longer battery life.

That in itself can explain the depreciation rate: new Android phones are so
much better and cheaper than old Android phones that the old ones can't
compete except at a very low price point.

~~~
r00fus
3 year contract??? That is horrible.

~~~
wmwong
In Canada, that's pretty normal. They lock you in tight. We're disadvantaged
in almost every way when it comes to mobile carriers. Horrible.

------
mrfu
"At Priceonomics, we firmly believe that resale value is the best objective
indicator of product quality."

I may have missed something, but given that prices are supposed to reflect the
supply vs demand ratio (in a sane market), how can they end up "firmly"
believing that resale value is an objective indicator for quality ?

~~~
jrockway
Because they like Apple and have some "data" that shows Apple is better. The
only missing piece is _how_ that data makes Apple better, and that's what this
statement is for.

------
drcube
The lesson here is to buy used phones outright for cheap and hasten the
decline of carrier lock-in. That's what I got out of the article at least.

The difference in depreciation between iphones and androud seemed pretty small
to me, and probably represents the overall inflated price of the half-eaten
fruit logo. I see laptops on craigslist with similar specs: $2000 for Mac and
~$500 for Dell. Like Billy Beane, I buy cheap and undervalued.

~~~
tomerico
I have got the exact opposite lesson: a 1 year old iPhone has lost 25% of its
value, and it loses another 25% of the original value the next year. So you
lose the same amount with an older phone

In other words - imagine a rich person buying a new iPhone every year and
selling the old one to his poor friend. Both of them eventually pay the same
amount for the phone, but the poor friend got a used one.

~~~
InclinedPlane
I think you might be misreading the graphs. According to the article a 1 year
old iPhone depreciates by about 40%, and a 2 year old iPhone depreciates by
around 65-70%.

Thus, a person selling their 1 year old iPhone would fail to recoup 40% of the
sticker price overall while someone buying 1 year old phones and selling them
a year later would fail to recoup all but 25% of the sticker price, give or
take.

------
functionform
"Our data suggests that buying an iPhone is a better economic decision"

Wow, what a leap. Is the author aware the purchasing a phone for resale value
is actually NOT the main reason to purchase a smartphone? Any article that
starts by quoting MG Siegler should immediately be discounted anyway.

~~~
jcitme
To be fair the followed it right up with a critical quote, but I agree.

------
LVB
It's an interesting analysis, but I don't see how the results would affect my
buying decision _at all_. What's the actual dollar amount difference in
reselling an iPhone for 53% of original price vs Android at 42%? Maybe
$50-$80? How much in carrier fees have I spent over that 18 months? Well over
$1000.

The difference in resale value versus the entire expense of owning these
phones is insignificant. Or at least it's not significant enough to outweigh
the preference one might have for a given phone. What if the numbers were
flipped? How many iPhone owners would choose to switch to Android if they knew
they could save $70 over the next year and a half?

~~~
vacri
They lost me with this: _Skip those extra GBs on your iPhone. An additional
8GB of hard drive costs you an extra $100 upfront but only adds $10 to the
resale value of your phone. The secondary market doesn't value extra hard
drive space on an iPhone, so get the one with the smallest amount of disk
space._

Hey fellas - there is more to a phone than resale value. If you're only
thinking about how much you can sell it for at the end of possession, then I
think I'll give your review a skip.

~~~
LVB
I found their opening quotes to be a bit at odds with the rest of their logic:

 _"It's probably hard for a Mercedes owner to describe to a Honda owner how
attention to detail makes their driving experience better."_

Right, and said Mercedes owner probably isn't going to buy a Honda next time
just because it holds its resale value better.

~~~
vacri
Looking at that particular quote is a bit weird for me. I bought a second-hand
Honda from a Mercedes dealership (obviously a trade-in), and the one thing the
merc salesdude kept rabbiting on about was how reliable and mechanically sound
Hondas are. I guess it depends on where you focus your 'attention to detail'
:)

(The car has been pretty robust, and yes, the passenger capsule wouldn't be as
nice as in a merc... but then again, when new these things go for half the
price of a merc)

------
jakeonthemove
I stopped reselling my electronics and just give them away to whomever needs
them - somehow, that's less depressing than knowing I bought something for
$500 and now I sell it for $100 (and my stuff looks like new even after years
of use).

Buying used smartphones, on the other hand, is great - you can get a G2X or a
Dell Venue Pro (excellent Windows 7 phone) for under $300 easily, and it will
work just as well as any other phone (especially the G2X with a custom ROM)...

------
cuu508
"At Priceonomics, we firmly believe that resale value is the best objective
indicator of product quality."

I'd say it indicates the speed of improvement--whether quality has topped out,
or is still improving.

Resale value for a hammer in a year migh be close to 100% of its original
value. It might be used and scratched, but it still works as new, and there
aren't any new revolutionary hammers out on market. Same with DSLR lenses, for
example.

Top end MTB bikes are of very high quality, a joy to ride. But they depreciate
sometimes by 50% in a year: new models are out, lighter, stronger, better-
handling and everyone wants to upgrade.

~~~
raganwald
_Top end MTB bikes are of very high quality, a joy to ride. But they
depreciate sometimes by 50% in a year: new models are out, lighter, stronger,
better-handling and everyone wants to upgrade._

be careful. Some high-end MTB brands depreciate more than others, which is the
exact point this article is promoting about phones.

~~~
cuu508
And I'm saying it might be not because of difference in immediate quality, but
because some brands have found their working formula and slowed down
experimenting, while others continue cranking out new stuff.

Brooks saddles look the same, act the same and cost the same now as 20 years
ago. A saddle that has been sitting in warehouse for 5 years would probably
have about the same market value as saddle made this year. I'm no Brooks
expert but that's the impression I get.

Shimano on the other hand updates its component groups each year. Their
products are highly evolved already, but still they find things to improve. So
people upgrade.

------
dodedo
I realize this isn't quite the point of the article, but I have a $29.99 Nokia
phone I've been using for years and I'm pretty sure I can resell it for at
least $20. Non-smart phones hold their value best of all.

~~~
moylan
some are even worth more than they were origianally.

[http://www.itp.net/553344-hackers-pay-top-dollar-for-old-
nok...](http://www.itp.net/553344-hackers-pay-top-dollar-for-old-
nokia-1100-handsets)

i've found that nokias sell well second hand. i wouldn't recommend an iphone
second hand as they are much more fragile than old solid nokias. i've seen a
number of iphones that the mic or wifi no longer works on and knowing the
users i don't think they abused the devices that much.

------
midas
It's pretty amazing that we pay ~$90 a month to Verizon but only ~$13 a month
to Apple. Intuitively it feels that Apple is the one creating most of the
value.

~~~
jonknee
You're aware that Verizon is also paying Apple right? The $200 you paid for
your iPhone turns into $600 for Apple.

~~~
midas
The post looks at the no-contract prices, so it assumes you paid ~$600 for the
phone and then sold it for ~$300 18 months later.

------
Terretta
Nice job leaving the rest of the headline off.

I've sold each model iPhone to date for more than I paid for it, even when
paying full (unlocked) rate. Apparently people consider there to be
significant value in a no contract phone.

~~~
omarish
Absolutely. A lot of those no-contract phones end up going abroad, where
people are willing to pay heavy premiums for the latest and greatest.

~~~
joering2
he probably sold the previous version (to get the newer one).

~~~
Terretta
Yes, I was selling prior versions. But also yes, they went usually to Puerto
Rico or Russia.

------
GernBlanston
More fodder for discussion here: [http://allthingsd.com/20120117/secondary-
iphone-market-a-boo...](http://allthingsd.com/20120117/secondary-iphone-
market-a-boon-for-att-verizon-and-apple-too/)

Turns out that the secondary market for the iPhone is nearly as robust as the
primary market. And it’s growing steadily larger and more important for
Apple’s carrier partners, and for Apple itself.

------
quaker
No doubt there is a robust resale market for iPhones, but if I'm not mistaken,
this article fails to take into account initial subsidized market prices when
making it's lifetime value calculations. Yes, iPhones are subsidized too, but
not completely; whereas most Android phones are not subject to the same price-
fixing policies, and can be purchased via authorized Verizon, AT&T, Sprint, or
T-Mobile resellers at significant discounts. In fact, 90% of Android phones --
even those with unsubsidized price tags of $500 -- can be purchased for FREE
(or sometimes $.01) with a contract from a carrier-authorized retailer such as
Amazon or Wirefly. So yes, if you walk into the Verizon store and pay $200 for
a Droid 3, your lifetime cost may end up being higher than an iPhone. But if
you have a brain, and get your Droid 3 from an authorized Verizon dealer, you
pay $0 for the exact same product, and the math shifts rather quickly.

------
bambax
Quoting Shakespeare at the end of the post sounds a little forced.

------
andrewrawr
The iphone is an ipod touch on the secondary market. But a used Android phone
looks pretty much useless to most people, especially when you can get a new
phone for free or cheap. The Google Galaxy Nexus is now $99 on Amazon Wireless
-- quite a bit cheaper than any comparable iphone. It's interesting that we
used to throw away cell phones but now they have value.

------
sp332
I have an EVO 4G from Sprint. It's less than 2 years old (still on the
original contract) but it's been EOL'd by Sprint. What's funny is that you can
still buy it from them, get a new contract for 2 years starting from now, but
they've already guaranteed that there will be no updates for it anymore.

------
aquinn
Unsurprising since phones are ditched by carriers after they're sold (orphaned
android user).

~~~
hollerith
Is your android phone that got ditched locked -- and the carrier would not
unlock it even after ditching it?

~~~
aquinn
There's newer firmware updates but they won't release them. Perhaps other
carriers have newer updates for my phone but i'm on a contract.

------
deepkut
This is an incredibly interesting article though I would urge you to include
some methodology. With some proper evidence behind these bold statements,
you'd be making headlines at TechCrunch (you still might anyways)!

Great read, I'm now interested in your business.

------
teyc
Percentages themselves do not tell the whole story. Better to use the total
cost of ownership.

A $1000 phone that loses 35% of its value ($350) compared to a $500 phone that
loses 50% of its value ($250) can put things into perspective.

~~~
HackR
This needs to be taken into account, thanks for bringing this up, didn't think
about it!

------
mladenkovacevic
Disagree with "A high resale value is the market telling you, 'this is a good
car.'"

A high re-sale value is the market telling you this is a well-regarded car
brand. The car itself could be the biggest lemon on the lot.

~~~
mladenkovacevic
also this line "Never trust anyone under 30 with a BlackBerry.”

So now we're supposed to judge something as complex as a person's
trustworthiness based on their consumerist choices? I understand it's meant to
be taken as an offbeat joke but as humorous as it's meant to be, statements
like that make me feel troubled and mildly depressed. I'd really not like
people to define me based on what phone I have :( Let's just have a beer and
talk instead :\

~~~
clorex
I don't really understand that quote. Will someone explain?

------
gardarh
Look at the "Crackberry Index" chart. Does anyone else get the feeling they
have too few datapoints to reach any meaningful conclusion?

------
yread
i think that variance is pretty crucial in this case. With iphones you always
have a high end device whereas the quality of android phones differ greatly. i
would still expect iphone to come out the best but still a comparison to
samsung galaxies would make more sense

~~~
enjo
Just sold my hacked droid Incredible (the original) for $400 fwiw.

~~~
ConstantineXVI
You got lucky with a seriously naive buyer. Going by VZ's listed (usually
inflated) price, the Incredible 2[1] goes for $430 brand new; so your buyer
either thought your hacking was worth the $200 (at least) premium or just
failed to do research.

[1]
[http://www.verizonwireless.com/b2c/store/controller?item=pho...](http://www.verizonwireless.com/b2c/store/controller?item=phoneFirst&action=viewPhoneDetail&selectedPhoneId=5641)

------
hollerith
I would hesitate to buy a used phone because these things like phones and
computer keyboards and mice that people constantly handle have the highest
level of germs, and getting germs and grease and stuff out of the various
nooks and crannies without damaging the electronics looks hard.

~~~
henrikschroder
That's an insane reason. Just by being in the same room as other people you
expose yourself to more germs than you would by touching a used and cleaned
phone.

~~~
hollerith
I have seen news reports of studies done by public-health researchers who
worry about computer keyboards and phones after measurements showed
surprisingly high numbers germs on these items.

It might be that the researchers were worried only about germs that can
survive for only a few days or cannot survive the type of cleaning achievable
without completely disassembling the phone, but it is not _obvious_ to me that
that is the case. For example, one hears about these biofilms that allow germs
to survive for very long times.

What are your reasons for believing that just being in the same room as other
people exposes a person to more germs?

------
cheez
Who cares?

