Can Samsung phone trade-in values ever match Apple's?

In this edition of Ask Maggie, CNET's Marguerite Reardon asked the trade-in site Gazelle to offer some data about which smartphones retain their values best over time.

Savvy smartphone owners know that trading in their existing smartphone can help finance the purchase of their next device.

This is especially true of Apple iPhone owners. But what about Google Android users? Samsung has seen great success with its high-end Galaxy series of smartphones. These phones typically costs as much or sometimes more than the Apple iPhone when they're first introduced. Do these devices hold their value as well as the iPhone when it comes to reselling them?

I asked the folks at the gadget trade-in site Gazelle for some help to answer this question. And I offer their insights in this edition of Ask Maggie. I also asked Gazelle to help me answer another reader's questions about what happens to your smartphone once it's traded in.

The iPhone may be king, but for how long?

Dear Maggie,
I know that Apple iPhones tend to hold their resale value pretty well. But what about Samsung Galaxy devices? Can I make back a good portion of the cash I spend on a new Galaxy device when I trade it in to buy the next hot smartphone on the market? I am pretty sure a Galaxy S5 is coming out soon, and I'm considering unloading my Galaxy S3 to buy it.

Thanks,
Looking for a good deal

Dear Looking for a good deal,
You are absolutely right about iPhones holding their value. But Anthony Scarsella, who is the chief gadget officer for the Gazelle trade-in Web site, said that smartphones from Samsung compete pretty well in terms of holding their value, at least initially.

Gazelle looked back at data from trade-ins on several phones, including the Samsung Galaxy S2, S3, and S4, as well as the iPhone 4S and iPhone 5. It also included a few other Android smartphones made by Motorola, LG and HTC. The company looked at how well these devices retained their resale value 6 months, 12 months, 18 months, and 24 months after being released into the market.

This chart shows how well devices hold their value over time, a factor that is increasingly playing a role in a consumer's decision on which new device to purchase. Gazelle

The interesting thing revealed by the data is that if devices are traded-in within 6 months of their launch, the iPhone and Samsung phones are pretty even regarding value retention. But once they've been on the market for one year, the iPhone does a much better job retaining its value.

Scarsella said there's a lesson to be learned from this.

"If you plan on upgrading your device each year, there isn't much difference in the trade-in value between the iPhone and Samsung," he said. "But if you're planning to keep your device for more than a year, the iPhone offers a much better opportunity to trade-in at a higher value down the line."

But this may change slightly over time resulting in some Samsung smartphones retaining value for longer periods of time. Scarsella said that "phablets" like the Galaxy Note, Note 2, and Note 3 are especially in high demand, particularly in places like Asia, where most of the phones that are traded-in end up.

Like the iPhone, high-end Samsung smartphones, like the Note, are often not subsidized by wireless operators in overseas markets. And buying these devices brand new can cost more than $1,000. The strong demand overseas may help drive resale values for Samsung devices going forward, and the gap in trade-in values between Apple and Samsung may narrow, Scarsella added.

The iPhone still rules
But he admitted that the iPhone is still likely to have an edge over Samsung products in terms of trade-in values. One of the biggest reasons driving this trend is due to how Apple releases and prices its products. The company only sells one version of the iPhone per year. And the prices of these devices are strictly controlled by Apple. The full retail price of the current iPhone never drops until the next version of the device is introduced.

Samsung has tried to replicate this product release timeline, but it hasn't quite worked out the same way for the company as it has for Apple. For example, the Samsung Galaxy S3 was introduced in the spring of 2012, but didn't begin selling on some US carrier networks until the summer. The follow up to that product, the Galaxy S4, was introduced in March 2013 and went on sale at most US carriers before the summer.

Another difference is that Samsung doesn't control the retail pricing of its devices the way that Apple does. For instance, the Galaxy S4 hit the market at a full retail price between $650 and $700. Most of the major carriers began offering it at $200 with a two-year contract. But since the phone was introduced, the full retail price has dropped. And the prices at full retail vary widely. For instance, the Galaxy S4 costs $525 today on Amazon. Meanwhile, T-Mobile is selling it at full price for $624.

While most contract plans still price the phone at $200, some have offered special promotions that have included the Galaxy S4, which significantly lowers the cost of the device.

Compare this to the iPhone 5S, which went on sale for $650 without a contract and $200 with a carrier contract. Nearly six months since it went on sale, those prices remain the same for a brand new iPhone.

The wide variation in pricing, and the fact that prices on brand new Samsung Galaxy S phones are declining, means that the trade-in value for these devices is also likely to depreciate more rapidly than the trade-in value of an iPhone, which has a pretty consistent pricing structure.

Scarsella said another reason why the iPhone holds its value better over time is also because the company doesn't change the body style too much when it releases new versions of the product. He said this is an old trick used by the auto industry.

"In the auto industry when the body style changes dramatically from one version to the next, you see rapid depreciation of older models," he said. "For instance, the Porsche 911 has looked the same almost forever. And the resale value of those cars is very high."

Bottom line
So what does all this mean for you and other high end Samsung Galaxy smartphone customers?

The good news is that demand is growing for these devices overseas, which is where most of the phones that are traded in get resold. Eventually, this could lead to higher trade-in values for these devices. But it's unlikely that these phones will ever hold their value as well as iPhones.

So if trading your phone to help defer the cost of your next phone is important, you need to consider how long you want to keep that phone. If you trade-in devices every year, it might not matter much between an iPhone and a high-end Samsung smartphone. But if you plan on keeping the phone until your contract expires after two years, the iPhone will likely offer you a better trade-in value.

In order to get the highest trade-in value, Scarsella recommends that regardless of whether you're planning to trade-in an iPhone or a Samsung Galaxy smartphone , you should lock-in your price before a new model is introduced. For example, with rumors of the Samsung Galaxy S5 coming out at Mobile World Congress at the end of February means that you should look into locking in your price now on an older Galaxy S phone. The price is good for 30 days and if the new phone hasn't been released within that 30 day window, you aren't obligated to send in your phone. So you could try locking in a new price.

"Anytime you are going to upgrade your phone, and there's an imminent launch of a new device, you should lock in your price," he said. "That's the best way to get the most value for your device."

I hope this advice was helpful. And good luck!

What happens to my phone when I trade it in?

Dear Maggie,
I have sold several old smartphones on sites like Gazelle and Nextworth. I know I could probably get more money if I tried to sell them on my own. But it's just easy. And the cash is pretty decent. Anyway, I was wondering what happens to those phones once they're sold? Other than making sure your phone is in pristine condition, is there any way to increase the value when you sell it through one of these sites?

Thanks,
James

Dear James,
I asked the folks at Gazelle to help me answer this question. They came up with a terrific infographic, which shows the life cycle of an old phone that is sold to Gazelle.

What happens to your gadget after you trade it in to a site, such as Gazelle? Gazelle

Let's start at the beginning. Once you lock in your quote with Gazelle, the company sends you a prepaid envelope, which you can use to send your device back to Gazelle. Once you drop it in the mail, it goes to Gazelle's facility in Louisville, Ky., where the device is wiped clean of any data from its previous owner. This is the point at which Gazelle assesses the true value of your device and cuts you a check for the amount you were quoted.

Once the device is wiped clean and restored to its original factory setting, it's then sent to wholesale buyers. About 70 percent of the gadgets that are sold to Gazelle go to a wholesaler. The other 30 percent are sold through Gazelle's own reseller channels, such as its online stores on eBay and Amazon.

Some of these wholesalers are in the US, but the majority are outside the US. There's a high concentration of resellers in Asia.

For the devices headed for the Asian market, they likely end up in Hong Kong. Once in Hong Kong, the phones get a makeover of sorts, where the outside is cleaned up and the software gets refreshed. Then it goes onto its final destination, which is a another reseller in a local market, such as Indonesia. The device is then sold as a refurbished phone by the reseller, and it finds a new home with a new family.

Most of the demand for smartphones outside the US is for the iPhone, but as I mentioned in my previous answer, there is also growing demand for the Samsung Galaxy S phones and the Galaxy Note "phablets."

Gazelle's Scarsella said that his company does its best to ensure that the company is not buying and then reselling lost or stolen phones. The company works with a third party to determine when a phone comes into its warehouse if it's able to be resold. The company checks the serial number and compares it to a database that tracks lost and stolen devices. If it finds something fishy, the company quarantines the device, notifies law enforcement, shares a record with law enforcement of where the device will be shipped and then it returns the device.

Gazelle also allows people to trade in broken devices. You won't get as much for a broken device as one that is in good working condition, but you'll at least get something, no matter the condition.

Tips for getting the best value on your trade-in

The best way to make sure you're getting the best value for your trade-in is to do two things.

1. Make sure your device is unlocked. This means that the carrier lock that likely came with your phone is disabled. Check your wireless service provider's policy, but many of these devices can be carrier unlocked once a customer has owned the device for a certain time or has paid off the contract. Even though Gazelle will accept locked devices, because it sells the majority of the trade-ins overseas, it helps make the process run more smoothly if the device is already unlocked.

For example, the trade-in value difference between a locked and unlocked iPhone can be significant. An unlocked iPhone 5S from AT&T will get $330. Meanwhile a locked version of that same phone only fetches $280; that's a $50 difference.

"Now that the FCC requires carriers to provide an unlock code within 48 hours if the device meets a carrier's criteria for unlocking, it's just money sitting on the table," Scarsella said.

2. The other thing you can do to make sure you get the most for your trade-in is to lock in a price before the next model of that device is announced. Gazelle allows you to lock in your price for 30 days. And you are under no obligation to send in your device at the end of that period. So if a new phone still hasn't been announced, you can lock in another price for 30 days.

I hope this helps explain things for you. Thanks for reading the column. And good luck.

Ask Maggie is an advice column that answers readers' wireless and broadband questions. The column now appears twice a week on CNET offering readers a double dosage of Ask Maggie's advice. If you have a question, I'd love to hear from you. Please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.

 

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