I'm a gadget nerd. I love having the latest and greatest phone. But my wife is more frugal -- she'd rather run her phone into the ground before upgrading. But is upgrading every three years really more cost effective than upgrading every year? I ran some numbers to find out. Title image by Sam Woolley.
Most of the time, the most cost-effective way to upgrade your phone is to sell your old one, and use that money to (partially) pay for the new one. But I always wondered whether it was more cost effective to sell your old phone early, while it still had value, or run it into the ground. Which saves you more money in the long run?
What Are Old iPhones Currently Selling For?
Here's my theory: If we can look at the average market price for the last few generations of iPhone, we can use those to estimate how much value your iPhone loses every year. So, the price of an iPhone 6 in September 2015 estimates an iPhone's value after it's one year old, an iPhone 5S estimates a two year old iPhone, and so on. From there, we can calculate how much it'd cost you to upgrade to the latest phone from each model.
To calculate average selling prices, I looked the "Recent Sold Average Price" on Swappa for the lowest-tier version of the phone on all four major carriers, plus unlocked versions. I averaged those 5 prices together to get an "average" price for that phone at the time of this writing. Those numbers will change quickly now that the new iPhone has been announced, but the general rules should stay pretty similar.
I also ran a similar search in my local area on Craigslist, which is not the best benchmark, but followed a very similar trajectory to the numbers from Swappa. I also checked ThePriceGeek, which finds average selling prices on eBay. Phones lost value a bit quicker on eBay, but that's ok -- I don't really recommend selling your phone there anyway (which I'll discuss in a bit). You can view the data I collected in this spreadsheet, if you so desire.
These calculations are far from scientific, of course. They're napkin maths at best, but it's the best I could do with the data I had. It would be impossible to predict how much your phone will fall in value next year, how much the phone you're upgrading to will cost, and so on. Maybe your current phone isn't in very good condition, or maybe you got lucky and sold it for more than it was really worth. But, with all things kept as equal as possible, I did find a trend: iPhones tend to lose most of their value in the first two years, after which they lose a bit less per year. (This trend does not apply to Android phones, from my research -- only the iPhone, which is in more steady demand over time.)
How Often Should You Upgrade?
So, with this information at my fingertips, I did some maths: how much it costs you to sell your old phone to buy the latest model every one, two, and three years. (You could sell after four, but by then your phone will have degraded in performance and battery life quite a bit, so most people will probably upgrade before then.)
To do this, I subtracted the "market price" for a phone from its original list price ($650 for each iPhone), then multiplied that by a number of years to see how it'd affect you in the long run. Since we're measuring every one, two, and three years, let's use 6 years as our least common denominator. The costs quoted are in US dollars. Here's what I found:
- If you upgrade your iPhone every year for six years, you'll spend $1014.
- If you upgrade your iPhone every two years for six years, you'll spend $1044.
- If you upgrade your iPhone every three year for six years, you you'll spend $932.
- If you upgrade your iPhone every four years for six years, you'll spend $817 (adjusted for the six-year period).
Again, you can see the full maths in this spreadsheet.
Looking at those numbers, it seems that it's most cost effective to sell your phone every three years or more, but just by a nose. Doing so will save you around $US100 over the course of six years on Swappa. If you use my Craigslist numbers, it comes out closer to $US160.
Even more interestingly, selling your phone every year and every two years is pretty darn close to equal. So if every three years is a bit too long for you, you might as well upgrade every year and have the latest and greatest!
Where to Sell Your Phone
Most of this maths hinges on one very important fact: you should sell your phone using a site that doesn't take a bunch of extra fees. eBay is not a great place to sell, because the more your phone sells for, the more they take from you -- which changes the above maths considerably.
Instead, sell your phone on a site like Swappa, that charges a flat fee no matter how much your phone sells for. Alternatively, sell on Craigslist, or to a friend. Just don't sell anywhere that charges big fees. I don't recommend trading it in on Amazon or Gazelle, either -- sure, it's slightly easier, but you get a lot less money back.
Also, remember: the sooner you sell your phone before the new model comes out, the better. The longer you wait, the more money you'll lose on the upgrade.
The Verdict: Upgrade Whenever You Want
At the end of the day, the differences aren't enormous -- selling every three years only gets you an extra $100-$200 after six years, depending on where you sell. If you're the frugal type, maybe that's a lot to you. But if you like upgrading, $15 to $30 per year is a small price to pay for always having the latest phone. You just need to sell your old one and keep it in good condition.
Of course, this doesn't apply to those of you on an early upgrade or leasing plan. This applies to buying your phone outright, or (in most cases) financing plans that have you paying off your phone over two years. You may have to compare it to your own contract to see how it stacks up, but for those of us in the off-contract world, this is a pretty good plan. So go sell those phones!