A hot market for pre-owned gadgets is a boon to savvy consumers

The market for pre-owned gadgets is booming these days — and you shouldn’t overlook it when you’re buying a device.

That’s the message I offer two different readers of Ask Maggie. The first wants to know if buying a used smartphone is a good idea for her teenage daughter, while the second wants to know if theApple Watch is likely to hold its value like other Apple products.

In spite of a never-ending pipeline of new smartphones, tablets and other gadgets, a growing number of consumers are opting for pre-owned devices. Earlier this year, tech-research firm Gartner predicted that the market for used smartphones will roughly double to 120 million units, or a wholesale value of $14 billion, by 2017.

Even though there’s always been a market for used cell phones, most of them were sold overseas. Now — as wireless operators push customers to pay full price for smartphones and as consumers grow accustomed to buying unsubsidized tablets — consumers are realizing the true value of their tech devices.

Gadget trade-in site Gazelle has capitalized on this trend. Last October, the company expanded its service to include a resale section on its site, offering consumers the opportunity to buy used devices from Gazelle as well as trade in old devices for cash.

Kids and smartphones: Do you buy used or new?

Dear Maggie,

My daughter is graduating from eighth grade next month. In our household, we’ve made this milestone the time when my kids get their first cell phone. I’d like to get her an iPhone 6. I’ve been considering buying her a used device instead of a brand-new one. (Past experience with my son, who is two years older, has taught me that iPhones often go “missing” or get dropped.) My daughter is a good kid. But let’s face it, she’s a kid. What do you think about buying a used phone instead of a new one? Good idea or bad idea?

Thanks,
Frugal Mama

Dear Frugal Mama,

Buying a gently used smartphone is definitely a good idea. It’s similar to buying a used car versus a new car. The ink is barely dry on the down payment on a new car when that car starts depreciating. The same is true for a new smartphone.

What this means for you is that you could get a significant discount on an iPhone 6 simply by buying it used. Right now on the resale marketplace Gazelle you can buy a used 16GB iPhone 6 for $519. This compares with the full retail price of $650 for a brand-new version.

“It’s a great way to get bleeding-edge technology on the cheap,” said Sarah Welch, chief marketing officer for Gazelle.

Now, you could argue that you’d pay only $200 for this device if you signed up for a carrier contract. But most major carriers now offer discounts on their service if you bring your own device to the network. This means you can save $15 or more a month on service by bringing your own gadget. Carriers also offer device-financing options, which add a few more dollars a month to your service plan until the device is paid off. But don’t be fooled, you’ll end up paying the full $650 for the new iPhone 6 no matter how you slice and dice your plan.

You can save a significant chunk of change by buying a used device and going with a plan that offers a discount for bringing your own gadget to the network. In the case of the iPhone 6, you’ll be able to pocket more than $100.

As you point out in your question, teenagers and small children aren’t known for being careful with expensive items. (My children are much younger than yours; still, I had no idea a smartphone screen could shatter so easily until I witnessed my 18-month-old daughter hurl a Moto X across the room.)

How likely is it that your daughter’s phone will be broken or stolen in the next few years? Pretty high. Gazelle recently surveyed more than 600 Americans with children under the age of 25 and found that nearly 70 percent of parents reported that a child in their household had broken or lost at least one smartphone. About 23 percent of respondents said their kids had lost or broken three or more phones.

Kids don’t seem to discriminate between Android and iOS devices when it comes to being careless. About 65 percent of iOS owners report a child has broken at least one iPhone or iPad, and 78 percent of Android smartphone and tablet owners say at least one device has been broken by a child.

When you look at those statistics, it seems like a no-brainer. Why pay more for a device that’s likely to suffer from a cracked screen, be dropped in the toilet, lost at an amusement park or stolen from a backpack? It makes more sense to save yourself some cash now and put the money you save toward a fund to pay for the replacement device.

Think of it this way, would you buy your teenager a brand-new car? Probably not. So, by the same logic, it makes perfect sense to buy a used smartphone.

This doesn’t mean you should buy any used iPhone. Just like when you’re in the market for a used car, it’s a good idea to stick with a reputable company that can certify that the used device you’re purchasing is in good working condition. Major wireless operators, like AT&T and Verizon, offer certified pre-owned devices. Verizon says its devices come with a 1-year manufacturer warranty as well. Sites like Gazelle, which also take trade-ins, can sell you a used device that’s been inspected, wiped clean of data from the previous owner and comes with a 30-day return policy.

I hope this helps. And good luck to you and your daughter.

Will the Apple Watch hold its resale value?

Dear Maggie,

I’m the biggest Apple fanboy there is. And I’ve had my eye on the Apple Watch since it was announced. I really want one. I’m in high school, and I have some money saved up to buy one. I know Apple will probably come out with a new watch next year or maybe even sooner that’s even better than this one. But I still want one now. I’ve had good luck in the past reselling Apple products so I can buy the next generation. Do you think I’ll be able to do the same with the Apple Watch? Or do you think I should wait until the next-generation product is released even though I really don’t want to wait?

Thanks,
Apple Watch Dreamer

Dear Apple Watch Dreamer,

As a self-professed Apple fanboy, you know that Apple products hold their value better than any other gadgets on the market. So if history is any indication of how the resale market will play out for the Apple Watch, chances are you’ll be in decent shape when you want to trade in your old watch for a newer one.

The gadget trade-in and resale site Gazelle has provided resale data for the first-generation Apple iPad to give consumers an idea of what they might expect from the Apple Watch. What they’ve found is that a year after the first iPad launched, it retained 44 percent of its value. Two years after the launch, it sold for 30 percent of the original price.


Gazelle

The retail price for a new Apple Watch spans a huge range across 38 different models. The least expensive is the 38mm aluminum Apple Watch Sport, which sells for $349. Then there’s the 42mm 18-karat gold Apple Watch Edition, which sells for a whopping $17,000.

If the Apple Watch follows a similar trend as the first-generation iPad, then you could expect the 38mm Apple Watch Sport to fetch you $154 after one year and $105 after the second year. The gold Apple Watch Edition would sell for $7,480 after the first year and $5,100 after the second year.

But it’s hard to say with certainty that the Apple Watch will follow this same trend. Apple Watch is different from any other device Apple has sold. For one, there are several more options to choose from, including stainless steel, aluminum and gold finishes and six watchbands. It’s also a more personal, fashion-centric gadget. And the device is being sold differently than Apple’s popular iPhones and iPads. Customers can’t walk into a store and buy a new Apple Watch. Instead, all purchases will be made online, with customers able to schedule appointments at the retail stores for fittings.

Still, Gazelle is confident there will be a strong resale market for the device, and the site is already preparing to buy and resell pre-owned Apple Watches.

What should you do?

If you’ve got the cash and you really want an Apple Watch, I say go for it. It’s definitely not a device that anyone needs. But that’s true of a lot of gadgets. (Who really needs a tablet or e-reader?) It’s likely to be outdated in a couple of years, but that’s true of almost all new technology as well. The good news is that history is on your side in terms of resale value for Apple products. People seem to have an insatiable appetite for all things Apple. So there’s a good chance you’ll be able to make some of your money back to buy the next version of the Apple Watch.

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