There’s been a huge industry-wide push for old iPhones in the run-up to Apple’s big Sept. 9 event.
iPhone trade-in programs have become big business for consumers and companies, alike. Those who want new iPhones every year can sell their used Apple handset and significantly defray the costs of an upgrade. Consumers, meanwhile, can pick up a slightly older iPhone in good condition and get it at a decent price.
Last week, Gazelle, a company that buys and sells used gadgets, announced a “Best Price Guarantee” program that promises to beat any carrier’s trade-in price by at least $1 on recent iPhone models. There are a few caveats to the program—namely that the company won’t cover early termination fees and will only offer the deal to customers who stick with the same carrier—although it did shed a light on what is becoming a hotly contested space: used iPhones.
Soon after Gazelle announced its plan, a competitor, NextWorth, tried to keep pace by releasing a statement saying that its iPhone trade-in values are higher than those at Gazelle. The company said at that time that it would offer customers up to $430 for Apple’s iPhone 6 and up to $480 for the iPhone 6 Plus. Those figures, NextWorth said, were $40 higher than Gazelle’s pricing on the same models. (Gazelle says it won’t offer its Best Price Guarantee on NextWorth pricing.)
Meanwhile, both companies are competing with, well, everyone. Apple (AAPL) offers a recycling program that provides customers in-store gift cards. Amazon (AMZN) has a prominent iPhone trade-in program, along with Best Buy (BBY), Walmart, Staples (SPLS), and even GameStop. All four major carriers—AT&T, Verizon, Sprint, and T-Mobile—also offer iPhone trade-ins.
“Cost savings is a major driver for consumers who don’t mind not having the very latest technology,” Gazelle chief marketing officer Sarah Welch told Fortune. “As carriers move away from smartphone subsidies and start charging the full-value of a device, many consumers are looking for more cost effective alternatives. iPhones now cost over $650, whether paid upfront or in monthly installments, which is more than many consumers are willing to pay for marginally better technology than last year’s model.”
What’s interesting this year, however, is how hard-charging companies have been in actively seeking iPhones. In addition to Gazelle and NextWorth, all of the major carriers are actively promoting their trade-in programs. AT&T (ATT), for instance, has its trade-in service as one of the five main highlights on its homepage. Verizon (VZ) and Sprint (S) are using parts of their homepage to share deals customers can get by trading in devices. Even GameStop, which makes the bulk of its cash on the sale of video game hardware and software, is using part of its homepage to coax consumers into finding out how much it’ll pay for a trade-in.
So, why is there so much interest in buying up iPhones? Blame it partly on Apple’s Sept. 9 press event where it’s expected to announce a new (and seemingly highly desirable) iPhone. According to NextWorth, 2015 has been an “atypical” year for trade-ins, and the total number of customer trade-ins is up significantly.
“The anticipation of the newest Apple device always drives an uptick in trade-ins for us, and we’ve seen particular interest in tomorrow’s announcement, with a 74% increase in iPhone trade-ins over the same period last year,” Jeff Trachsel, chief marketing officer for NextWorth, told Fortune. “Even though this announcement will likely be an ‘S’ version with little to no form factor changes, consumers seem to continue to have an ever-growing interest in new iPhones…. Right now almost 50% of iPhone trades at NextWorth.com are iPhone 6 or 6 Plus when that number has historically been more like 25%.”
That seemingly large number of people interested in trading in older iPhones, coupled with strong demand for Apple’s upcoming handset, suggests there are significant market opportunities for companies buying and selling used devices.
“iPhone trade-ins have high residual value because there is an incredibly strong demand for this in the secondary market,” Trachsel told Fortune. “Because companies can sell them for more, they are able to offer higher prices to consumers. This in turn helps consumers upgrade more frequently and for less which creates a kind of virtuous cycle.”
That said, time is running out. While prices and demand for used iPhones are historically high, trade-in values tend to decline significantly after a new iPhone is announced. Worried that supply may outstrip demand, companies trim trade-in prices to hedge against market fluctuation. Indeed, by the end of the year, prices can decline by nearly 35%, depending on how old an iPhone is, NextWorth said in a statement in July.
“The value of an iPhone also declines post-Apple event, so if a customer wants to receive the best price on their trade-in, it’s best to do it now,” Welch said.