With Apple’s new iPhones due to go on sale on Sept. 20, resale sites have reported a surge in trade-ins of old iPhones. Once the new iPhone 5S and 5C models go on sale, trade-in values are expected to plummet, but for now, experts say consumers can still lock in high enough prices to break even on the upgrade to a new phone — or even earn a profit.
Apple (AAPL) CEO Tim Cook unveiled the seventh generation iPhone on Tuesday: the iPhone 5S, which features fingerprint scanning technology, and a cheaper plastic iPhone 5C. The 5S will cost $199 with a two-year wireless contract, while the 5C, which will be available for preorder starting Sept. 13, will cost $99. With most offers, it’s possible to sell the iPhone 4S and iPhone 5 — which will be phased out by Apple — and make a profit.
Apple’s entry into the iPhone resale market last month made many consumers aware that old iPhones stashed away in sock drawers could be worth hundreds of dollars. During Apple’s iPhone announcement Tuesday, the number of offers on resale site Gazelle.com peaked at over 600 per second. By offering $350 for an iPhone 5 in pristine condition, Gazelle has one of the best cash-back offers on the market. Rival site NextWorth.com offers $320 for a 16 gigabyte iPhone 5; ProtectCell.com offers $325.
“The introduction of Wal-Mart (WMT) and Apple into the trade-in space obviously increases the competition among pre-existing trade-in suppliers like ourselves,” says Scott McLaren, chief marketing officer at resale company ProtectCell. Apple may have raised awareness of trade-ins, but with a $280 store credit for an iPhone 5 at retail stores, it doesn’t beat the best cash deal on the market. Wal-Mart offers just a $200 credit for the iPhone 5.
Amazon (AMZN) currently has one of the best trade-in values for the iPhone 5: the online retailer will give consumers an Amazon gift card worth $363 for a 16GB version from AT&T and a $242 gift card for an iPhone 4S. Unlike Apple and Wal-Mart, Amazon also has a grace period: From Sept. 11, customers who trade in their iPhones with Amazon can lock in their trade-in values until Oct. 15. Without a grace period, customers can sell their iPhones directly to consumers on Amazon and eBay.com (EBAY) .
But current prices won’t last. There will be a 10% to 20% decline leading up to Sept. 20, says Jeff Trachsel, chief marketing officer of NextWorth, although Gazelle estimates the price drop at up to 25%. NextWorth gives customers a 30-day grace period between signing a contract and handing over their phone; Gazelle offers 50 days. “People will have a hard time getting their hands on the iPhone 5S,” says Anthony Scarsella, chief gadget officer at Gazelle. “Apple wants the long lines, and the press and hype that go with that.”
Of course, the expanded resale market with Apple and Wal-Mart helps prop up the sales of new iPhones with a two-year contract. “Phone makers and carriers must work harder every year to convince people to upgrade their phones,” says Brian Colello, an analyst with Morningstar. “Apple is adding more innovative features like a faster processor and better camera, but some people think that there might not be enough bells and whistles to make it worth it,” Colello says. “iPhones continue to be evolutionary not revolutionary.”
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