Will Poor Trade-in Deals Kill The $2,000+ Smartphone?

Apr 23, 2019
By: Marissa Camilli

It’s a well-known fact, the moment you drive a brand new vehicle off of a sales lot, it loses value. Experts will tell you that within 30 days of taking ownership of your new car it will have probably lost around 10 percent of its value and will typically lose between 50 and 60 percent over a three year period. But this is nothing on the value you lose on your smartphone within a couple of weeks of unboxing the device.

Because purchasing a car is most likely the second most expensive thing (next to a home) you might buy in your lifetime, we are right to worry about the resale value of a vehicle. Very few people have the financial clout to be able to right-off the total cost of a car after a few years and, quite rightly, will want to leverage its value when it comes to buying a new one.

A car, after all, isn’t like that old smartphone you’ve got stuffed at the back of a drawer (I’ve actually got a drawer full of them). Economically, when compared to a car, a smartphone is fairly disposable (although we’d prefer if you recycled them). However, smartphones are creeping up in price and top-end models, while still not quite in the same league as a car, are still very much a considered purchase.

Status Symbols

There can be little doubt that, for many people, the smartphone in their pocket is as much a status symbol as the car parked outside their house.

However, it didn’t seem too long along that we were looking at $1,000 smartphones and wondering how much further manufacturers could push-up the value. But in recent months we’ve seen announcements around devices like the Galaxy Fold and the Huawei Mate X tipping the scales with at $1,980 and a staggering $2,299 respectively.

$2,000 is a lot of money to spend on anything and most people will want to know that their device holds its value over its lifetime.

Unfortunately, the news isn’t good. In fact, when you consider how quickly a smartphone loses its value, buying a car suddenly looks like a good investment.

Smartphone Depreciation

According to the trade-in comparison site BankMyCell smartphones can depreciate at a staggering level.

The site highlights figures that suggest a Samsung Galaxy S9 smartphone released in March 2018 for $720, lost 60 percent of its value in just nine months. Much of this depreciation (nearly 42 percent) occurs after just one month.

This essentially means, after only 30 days that $720 device is now only worth around $418.

OK, a $400+ loss is bad enough – but if, for example, the Huawei Mate X depreciation followed a similar pattern, you could expect to wave goodbye to a cool $965 in the first month of ownership.

The difficult thing to consider when buying technology is the knowledge that within as little as twelve months your top-end device will be outpaced by more mid-range models. So is buying a top-end model ever a good idea?

It’s also worth considering that an unproven (or, at least, untested by the general public) technology like a foldable device is an unknown quantity. If, after a couple of months, the fold begins to fail, the resale value will undoubtedly plummet.

With this in mind, savvy smartphone buys might wish to wait a couple of months before investing in any cutting edge tech.

No More Devices Left in the Back of the Drawer

One thing is for sure, as smartphone costs continue to rise, buyers will become more aware of the resale value. This is particularly true because many of the people who buy top-end devices will want to be seen to remain at the cutting edge and therefore won’t keep hold of their devices for too long.

The question is, how many sales cycles will it take before top-end device buyers feel a little jaded by such heavy depreciation and will this force device manufacturers to reconsider their pricing strategies?

Note: The research and development that goes into creating cutting edge devices costs a lot of money – but this doesn’t mean that new devices have to be extortionately priced. High prices are often a business and marketing decision and can be adjusted by economies of scale – and remember these devices sell in millions. It’s also worth remembering, aside from sales there are other strategies device manufacturers can look at to monetize their products. Hint: Digital Turbine can help with this with.

New or New to You

Whether the potentially rapid depreciation of $2,000+ smartphone will impact on sales remains to be seen. However, we can expect to see high prices focus people’s minds on how they acquire their devices. Will they buy new, or wait a couple of months for a mid-range alternative, or look for the big brand devices on the second-hand market?

Reaching Smartphone Owners in a Disjointed Marketplace

Regardless of how people buy their smartphones, Digital Turbine can help app developers position their apps in front of the right people at the right time. Whether it’s a brand new top-end device or a second-hand smartphone – we have you covered. To learn more, talk to one of our pre-loading experts today.

Marissa Camilli
By Marissa Camilli
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