SMARTPHONES:
WHAT TO EXPECT IN 2020

Price Perception and Phone Depreciation

Price Perception and Phone Depreciation

You may have heard that your car starts to lose value as soon as you drive it off the lot. As soon as you peel off that shiny plastic wrapper, your phone starts to do the same. As more time passes, phones become worth less. If you plan to sell or trade in your phone when you're done with it, it helps to have a good understanding of phone depreciation.

Like cars, the price of a used phone will vary based on factors like its condition and manufacturer. While you know your phone loses value over time, you may not realize how high phone depreciation rates can be. The used phone market is complicated and changes quickly, often in response to new technology. It can be tough to predict how much your phone is worth.

What Is Depreciation?

Phone manufacturers release new electronics every year, so you may not be surprised that electronics lose their value very quickly. 

In general, depreciation refers to how much value an item loses over time. You may have heard this most likely in relation to vehicles, antiques, collectors items, etc. Depreciation works the same way with just about everything you buy, too, including cell phones.

Phone manufacturers release new electronics every year, so you may not be surprised that electronics lose their value very quickly. If you got your phone a year ago, it may feel like that's not long at all. But if manufacturers have released new phones and features since then, your phone could easily have lost half of its value in that time. Even if you only consider Apple and Samsung, that's at least 10 new devices every year.

These newer models bring new features and better builds. Compared to these new devices, your older phone seems outdated and less capable, so the value of your device starts to drop. Even if you keep your phone in excellent condition, it usually loses the most value in the first few months or the first year. Eventually the phone relinquishes to a $0 value. 

The Similarities Between Phones and Cars

The Similarities Between Phones and Cars

Phone depreciation usually works like car depreciation, just on a smaller scale. When we break things down like this, it is easier to understand the value of your phone.

Some of the factors that influence how much a car is worth include the following:

Age
Make and model
Mileage
Condition
Ownership history
Reputation

A good way to look at phone depreciation is to review it in terms that we're already more familiar with — cars. If you've bought a car before, you likely put a lot of thought into it. You research available features and estimate how much money you might get for it when it's time to get your next car. If you traded in your old car when you bought that car, you already have firsthand experience in depreciation.

Some of the factors that influence how much a car is worth include the following:

  • Age: Of course, an older car is going to be worth less. Like phones, they lose the most value in the first year. Generally, a car that's a year old has lost about 20% of its value. After five years, that number jumps to around 60%.
  • Make and model: Certain cars and certain manufacturers hold onto their value more. This might be because the car is from a respected manufacturer or the general quality of the vehicle. Some car producers simply use higher-quality materials or put more care into their products. People know products from these manufacturers last longer than the competition and are willing to pay more for them. You may recognize respected names like Subaru and Toyota — vehicles from these companies maintain their value well. Phones follow the same rules.
  • Mileage: While age is useful, mileage is a more accurate measure of how much owners used their vehicles. The more mileage, the less value the car has. Phones might not have a timer that tells you how many hours a device has been used, but you can determine phone life in other ways, such as by battery health. Phone batteries degrade over time, and some phones tell you how much capacity the battery has currently compared to when it was new.
  • Condition: A car with a large gash down the side will be worth less than one that doesn't. The amount of damage will also affect its value. A small ding on the door is usually easy to fix and won't reduce value too much. However, a crumpled front bumper definitely will. Unfortunately, even a small scratch can result in a lower offer on a used phone.

Phone depreciation usually works like car depreciation, just on a smaller scale. When we break things down like this, it is easier to understand the value of your phone. A small scratch on your phone might not seem like a lot, but after comparing it to damage on a car, its effect on your phone's value is clearer.

Factors in Phone Depreciation

With that in mind, let's look more closely at some factors for cell phones and how they'll affect your device's value.

Original Price

Generally, the less you pay for a phone, the faster it depreciates.

As you look into whether your old cell phone is worth money, you might start by recalling how much you paid for it. The original price of your phone is a good place to start calculating. If you got your phone on sale, you're at an advantage. A lower purchase price can lower your mobile depreciation rate since you spent less for the phone than it's listed for.

Many people only buy used cars specifically because they want to reduce how much their vehicles depreciate during their ownership. You can follow the same principle with your phone, too.

The average price of a smartphone in North America in 2019 was about $550. Phones depreciate much faster than cars, so you can't follow the "20% a year" rule of thumb that people use for vehicles. Generally, the less you pay for a phone, the faster it depreciates. Phones from popular brands like the Apple® iPhone or Samsung Galaxy tend to lose $100-$300 a year. Budget phones lose less in terms of dollar value, but it's a larger portion of their original purchase price.

We'll talk more about this later, but iPhone depreciation rates tend to be slower than Android depreciation rates.

Built-In Memory and Color

Limited-edition colors could be worth more, and the more popular the color, the more likely the phone will sell for a higher price.

Although this is a minor aspect, your phone's size and color can affect value, as well. For example, modern phones might include built-in memory as high as 1 terabyte. These phones cost more in the first place and often have a higher resale value.

Color can be an important part of the value. Limited-edition colors could be worth more, and the more popular the color, the more likely the phone will sell for a higher price. 

Condition

Condition

Excellent
Good
Fair
Poor

The phone's condition will play a major role in how much it's worth. You'll often see phones categorized into conditions like Excellent, Good, Fair or Poor. Different organizations define these categories differently, but they usually look something like this:

  • Excellent: Excellent or "like new" devices will look like you've just taken them out of the box. They won't have any nicks or cracks. These phones haven't been used for very long or were probably kept in a protective case by a careful owner. They'll fetch the highest price.
  • Good: Devices in good condition won't be quite as spotless, but they'll still look great. Any damage is small, around the size of a pencil eraser, and not very noticeable. This might look like a phone with a small scratch on the back of the casing but otherwise well-kept. Usually, phones in this category still have full functionality.
  • Fair: A "fair" device looks used, with noticeable damage. It might have many scratches or dents or have a crack in the screen. Since screens can be hard to replace, screen damage is often a significant factor in pricing. Resellers often label phones with broken screens as "fair" even if they have no other damages. Phones in this category may also lack functionality, such as not powering on.
  • Poor: Lastly, a "poor" device has extensive usage and damages. It is probably covered in scratches and dings and may not work properly. These phones sell for parts or will need restoring before being resold to someone.

To keep your phone in the "excellent" category, be sure to keep it in a protective case. You don't need to keep it in the bulkiest case you can find, but even a simple, lightweight case can go a long way in preventing scratches and dings. Choosing a phone with a stronger screen or getting "glass" screen protectors may also help you avoid cracks that will affect your phone's resale value.

Manufacturer

In September 2021, Android made up 72.44% of the market, with Apple at 26.75%

The manufacturer of a phone can affect value significantly. For example, Apple consistently tops the lists of phones with the best resale value. Phones from certain manufacturers are often worth more for a few different reasons:

  • Market saturation: Only a handful of iPhones come out every year, while Androids have many different manufacturers and models. One study found that there were 24,000 different Android devices, so no phone can become the most popular model. In comparison, Apple only releases new phones once a year, with four or five new models at that time. Buying a new iPhone practically guarantees the latest Apple tech for at least a year, while your new Android could become out-of-date within a few weeks.
  • Brand recognition: Apple has a great reputation, which increases demand. Users know it as a high-end phone company that prioritizes the customer experience and user safety. Apple has taken the top spot in Fortune's list of the World's Most Admired Companies for 14 consecutive years. Counterpoint Research found that Apple and Samsung dominated North American sales in 2020, but Asian markets favor brands like Huawei, Vivo, Xiaomi and OPPO.
  • Product support: iPhones are the only devices that run Apple's operating system, iOS. This system is compatible with other Apple products, and Apple generally supports their products for longer. Conversely, you can find the Android platform on many different devices, and they may not get regular upgrades. These manufacturers sometimes struggle to bring new versions of Android to the devices. Google delivers fast updates, allowing them to compete well with Apple.
  • User experience: Apple also controls the entire user experience of iPhones, from the processing chips to the operating system. Many Android phones have hardware designed separately from the software, which can affect the user experience. For example, the Samsung Galaxy lineup sources processors from Qualcomm and the Android OS from Google. These design decisions sometimes help create a better user experience that people will pay more for.
  • Security: Another reason that iPhone values tend to hold steady is because virus rates are lower. Apple has a stricter environment for third-party apps, and many hackers choose to target the wider net of Android devices. Nokia's 2019 Threat Intelligence Report pinned 47.15% of malware infections on Android devices and just 1% on Apple devices. The remainder went to Windows PCs and Internet of Things (IoT) devices.

Operating systems play a large role in resale value. While there are others besides Android and iOS, these two make up the overwhelming majority. In September 2021, Android made up 72.44% of the market, with Apple at 26.75%. Competitors like Samsung, KaiOS and Windows didn't reach 0.5%.

Age

Age typically equals more use and more distance from new technology. 

The age of the phone is one of the most important factors in how much value it will have. Age typically equals more use and more distance from new technology. A 4G LTE phone was a big deal when it came out, but the recent release of 5G-capable phones has made 4G phones less valuable. The same applies to new cameras, screen displays and other tech.

Modern infrastructure requires more modern phones. Consider network support. Newer phones may still work on 3G networks, but many telecom service providers are retiring those networks. Saving money by buying an older phone without 4G or 5G capabilities would make it impossible to use the device in areas that no longer have 3G network coverage. Sometimes a phone's most important features aren't the flashy new tech advertised, like a great camera or a lightning-fast refresh rate, so paying attention to the basics is useful.

The age of your phone also affects how future-proofed it is. Take mobile payments, for instance. Near-field communication (NFC) is necessary for most digital wallets, which are becoming more popular in North America and Europe and already have a huge hold in the Asia-Pacific region. NFC is fairly standard nowadays, but older phones may not have it. Newer phones will be able to handle whatever kind of tech appears in the future and can expect higher prices on the used market.

Still, this doesn't apply everywhere. As new technologies and networks appear, some regions will lag behind others or vary by what features are in demand. Markets can vary widely and change quickly.

When You Trade-In

Consider selling your used phone before next year's model gets announced. 

Another factor of your phone's trade-in value is the timing of when you trade it in. Many market influences can determine price, but knowing what trends affect the value of your phone can help you sell it when you'll get the most from it.

Some of the best times to trade in your phone are:

  • Before a new model comes out: Most major phone lineups come out on predictable schedules. For example, Galaxy phones release in January or February, while iPhones release in September. If you have a spare phone to tide you over in the meantime, consider selling your used phone before next year's model gets announced. Once the new phone comes out, yours officially becomes last year's model and will see a sizable drop in value.
  • When there is increased demand: Shipping delays, facility shutdowns and supply chain issues can all affect the supply and demand of phones. Your phone might fetch a higher price during times when fewer new phones are available to meet demand. The Google Pixel 5a 5G phones, for example, are only available in the U.S. and Japan, and Xiaomi has increased the price of some phones in India.
  • As soon as possible: Some people like to upgrade every year so they always have the newest phone model. If this is you, try to trade in your used phone as soon as possible. The longer you hang onto it, the less it's worth. Many people who buy used phones want devices that are only a year or two old, anyway.

The first point is the most important. The release of new phones can drastically reduce what your phone is worth. This applies with every new version that comes out, too, not just the first one. Carefully consider the timing of your trade-in to get the most out of it.

How Much Is My Phone Worth?

Want to see what your phone is worth? Plug it into our price checker online. If you like what you see, you can head to an ecoATM kiosk near you to trade in the device. If your phone isn't worth anything, we can ensure it is responsibly recycled. Reselling or recycling your device helps to reduce dangerous e-waste in the world. So far, we've kept over 28 million devices and would love to add yours to the list.

If you're replacing an existing phone, be sure to trade-in the old one to an ecoATM kiosk, where you can get cash for it. We'll give it a chance at a second life or ensure it is properly recycled. You must be 18 years of age or older to trade-in a phone at an ecoATM kiosk. Learn more about ecoATM kiosks or find one near you to get started.

Want to see what your phone is worth?

Plug it into our price checker online. If you like what you see, you can head to an ecoATM kiosk near you to trade in the device. 

ecoATM is a registered trademark of ecoATM, LLC. All rights reserved. All other trademarks are property of their respective owners. ecoATM is not is not affiliated with nor has it been authorized, sponsored, or otherwise approved by the third parties listed in this blog.

SMARTPHONES:
WHAT TO EXPECT IN 2020