How Fast Do Smartphones Lose Their Value?

Two people holding smartphones

Two people holding smartphones. Source

Your smartphone could lose value faster than you think

For many people, their smartphone is among their most expensive and valuable possessions. However, it can take a surprisingly short amount of time before that phone is worth a lot less than you paid. Technology is constantly being updated, new models are released and the chance of wear and tear over time means that the top price paid for a brand new phone slowly decreases until it is almost not worth the hassle of reselling. So why do phones lose their value, and how fast?

Why do phones depreciate?

Everyone loves that shiny new phone feeling, and people are willing to pay a lot more for the privilege of being the first to open the box and peel off the protective stickers. The problem for those looking to recoup some of the purchasing price is that as soon as the box has been opened, the phone starts to lose value.

There are many factors that influence how quickly that value is lost. Phone manufacturers tend to update their operating system regularly, so having an older system will be less desirable for re-selling purposes. The same goes for features included in the phone, and how fast the brands are changing. Sometimes the difference between two models of the same phone might be little more than a slightly better camera, but with a major release of a brand new feature, phones that came before that release are less valuable.

The Battle of the Brands

The brand of the phone is one of the biggest influences on the value of a second hand phone. LG lose their value the fastest – after one year, an LG phone has lost around 75% of its original value. HTC and Samsung are not too far behind, with 72% of the value lost over the same amount of time. iPhones hold their value better than any other brand, only depreciating by 57% over the course of a year. That being said, for a significant financial investment even 57% is a huge loss in a relatively short amount of time. By the end of two years, most brands have lost around 85% of their original value

Each brand loses value at a different rate

How much each brand depreciates over a year. Source

Modern depreciation

These days, smart phones have reached a point where the updates are getting less revolutionary, and the difference between a new phone and the one that came before is not enough for most people to justify an upgrade. With the high price of phones, having an operating system that has an almost undetectable difference in speed or a slightly thinner frame is just not as tempting for customers.

Some people have described the phenomenon as “peak smartphone”, meaning almost every person who wants a smartphone already has one, and most are holding onto their phones for longer. The industry in general is slowing down, and customers are less tempted by new phones that carry hefty price tags for little improvement.

Hold Your Value

While the resale value is a consideration when purchasing a phone, it’s not necessarily a primary consideration for most people. A phone is a tool, an entertainment system, and a luxury item – so customers are often looking at the features, the specs and the appearance over how much they might get back if they resell. However, there are some simple ways to help preserve a phone’s value.

Buying a protective case and screen protector is an effective way to preserve the appearance of the phone. Visible cracks and scratches not only detract from the appearance of the phone – they’re a clear indicator that the phone has been dropped and mistreated. Keeping the box and accessories to display the phone is another simple way to make your second-hand phone more desirable for potential buyers.

When you purchase your phone is also important – try to avoid purchasing around the time that another major release is scheduled. Your phone will quickly become second best, causing it to drop value even more. LG and HTC phone depreciate much faster than Samsung and Apple but sometimes the brand is less important when a major release of another anticipated phone occurs.

However, one of the best ways to avoid losing money is to buy the phone second hand in the first place. A well-cared for modern smart phone will often not be noticeably slower, bigger or have significantly fewer features than the more recent models, so they can often be a much better purchasing decision.

Smartphone depreciation is not something that can be avoided. Similar to a car, just taking it out of the store immediately decreases its value. The wisest financial decision is a well-cared for second hand phone, but for those who can’t resist buying new, Samsung and iPhone models are the most likely to hold their value for longer. Customers need to be prepared to lose almost all resale value within just a few years, so perhaps the best strategy is to get a phone that meets your needs, and be grateful if you do get anything back.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.