Would you spend full price for the latest iPhone?
With most trade-in offers, it’s possible to sell an old iPhone to a resale site or online retailer for half the cost of the new $750 iPhone XR, although you will still need to sign a two-year contract.
Apple AAPL, -0.80% unveiled the XR and two other new iPhones Wednesday. Once again, resale sites reported a surge in trade-ins of old iPhones ahead of the announcement, but they expect trade-in prices to drop in the days after the big event. For now, though, consumers can still lock in high enough prices to earn 50% back on the cost of the new iPhone XR by trading in their old gadget and upgrading to a new phone.
The market has become crowded for old phones. In previous years, it was possible to cover the entire cost by selling an iPhone that was over two years old. Not anymore. It’s possible to buy the iPhone XR for half the price, if you trade in your iPhone 7 on a resale site. (The XS is a different story, however. The 5.8-inch iPhone XS starts at $1,000 and 6.4-inch iPhone XS Max starts at $1,100, with the most expensive version retailing for $1,500.)
The resale market became more lucrative for consumers with the added competition in recent years from cellphone carriers entering the fray, but some analysts don’t expect that to last.
Target TGT, +1.89% sells a pre-owned 128-gigabyte iPhone 7 for $430. On eBay EBA, +0.18% a used 32GB iPhone 7 in excellent condition sells for $420, compared with resale sites MobileFlyp ($280), and range in price from $175 to $389 on other sites, including Gazelle, Gamestop, Nextworth and Glyde. Glyde spokesman Matthew Reardon says there’s typically a 15% decline in pricing for old iPhone models around and after a launch. (Newer iPhones no longer come with 128GB, and come with 64GB or 256GB.)
It was once possible to cover the entire cost of the latest version by selling an old iPhone. Not anymore.
The resale market is less lucrative this year and, as such, cellphone carriers may not be under as much pressure to offer deals to those who want to upgrade. Device upgrade rates reached record levels when the iPhone 6 launched and have been in decline ever since, Walt Piecyk, analyst at BTIG Research, said in a research note Wednesday.
“The move to device-payment plans and more recently reduced device promotions has also contributed to longer replacement cycles and lower churn, which have both dropped to record lows,” he added. “That is the worst possible environment for Apple’s iPhone sales, but the company has been able to manage through it with price increases.
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But for consumers who have second thoughts about upgrading, some resale sites allow you to hang on to your phone after agreeing to a trade-in deal. NextWorth and Gazelle give customers a 30-day grace period between signing a contract and handing over their phone. (Glyde has no grace period as it’s a peer-to-peer seller.) “Typically we see prices drop by 10% to 20% after Apple releases an iPhone,” said Chase Freeman, a spokesman for Gazelle.
So why not trade in the iPhone 8 and cover close to the entire cost of the new iPhone? Those who bought their iPhone last year still have 12 months left on their current contract and, therefore, would have to pay an early termination fee. More than half of people that currently own an iPhone plan typically trade up by the end of the year, according to resale site NextWorth, which has a vested interest in consumers selling their old devices.
‘We do not expect wireless operators to return to the aggressive device promotions they offered two years ago.’Walt Piecyk, analyst at BTIG Research
As Apple’s new-device releases become more frequent, the company must work harder to convince people to upgrade each year. While the smartphone market is getting saturated in the U.S., last year’s 10th-anniversary $999 “iPhone X” with facial recognition had a big impact and actually helped make up for a miss in unit sales in the fiscal third quarter, despite critics balking at the high price.
Apple chief executive Tim Cook is hoping that the upgrades and fanfare surrounding the latest iPhone upgrade will put pressure on Samsung. Nearly 35% of Americans say they have an iPhone, a recent survey of 2,000 people by marketing company Fluent found. Analysts estimate that anywhere from 18% to 35% of potential iPhone buyers are willing to spend $1,000 or more on a new iPhone. But even those churn rates are enough to keep upgrades flowing, if you assume more people are willing to upgrade to a $750 iPhone XR.
“Unfortunately, churn rates have been steadily dropping to new record lows each year,” Piecyk wrote in his note on Wednesday. “There has been some discussion about the implementation of a soft SIM in the iPhone, which would ease the ability to switch between carriers and presumably lead to higher churn. However, that would clearly not drive higher device sales.”
Ultimately, the days of trade-in offers that paid $650 for old phones are likely over. Promotions have shifted to “buy one, get one free,” which are often tied to new line activations or bundled media offerings, Piecyk said. “We do not expect wireless operators to return to the aggressive device promotions they offered two years ago,” he added.
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