Telcos will do a lot to encourage you to upgrade your phone early. We no longer have lock-in contracts for SIM plans and they’ll tempt you by plastering shiny new handsets all over your social media feed - but one tactic that they all share is the trade-in offer.
Trade-ins let you give your phone back to your telco for a credit to your bill, or a discount to your new handset. It seems like an enticing offer on the surface - after all, you’re not going to be using that phone anymore, so why not put that money towards the latest iPhone or Samsung?
The problem with a trade-in is that you are ostensibly selling your device back to your telco at a heavily discounted price. Never forget that when you’re on a phone plan you are in fact paying off your phone in monthly instalments. By the time you are ready to trade it in for a new model in two to three years, you will own that device. Trading these phones ultimately means that you’ve paid a lot of money to borrow your handset.
While trade-ins are widely used for major purchases like cars, a phone doesn’t lose its value in the same way that a vehicle does. iPhones especially don’t see significant discounts until at least a year after release and even so these price drops are marginal in the scheme of things. They certainly don’t fall to a place where a few hundred dollars is a fair exchange for the handset.
Let's say you want to trade in your iPhone 11 to go towards the new iPhone 13. The major telcos will give you between $400 and $475 back for it. Sure, that seems like a solid discount on a brand new iPhone - but a quick look at the Facebook Marketplace and you’ll find that iPhone 11 handsets are selling for around $700. Selling your phone privately immediately leaves you significantly better off than if you were to trade it in.
Even if you were to sell your old phone back to your telco the transaction doesn’t exactly stop there. Each of the major telcos use a trade-in partner that collects these handsets and either refurbishes them and sells them on, or disposes of them. Handsets in ‘good working order’ will get you the highest trade-in value, and will most likely be sold on as refurbished models. The going rate for a refurbished iPhone 11 is between $600 and $750, which means that not only do you sell your phone at a loss but the supplier makes a profit on it down the track.
When it comes to older models a trade-in may have a stronger allure, but consumers are still unlikely to get the market value. According to the one trade-in estimate, you can get up to $150 for an iPhone 7 without cosmetic damage. But you could get around the same if not more if you sold it privately on Facebook Marketplace - and hey people may even be more open to some small bumps and bruises on the device.
Although Android devices don’t retain their value in the same way that iPhones do, even older Samsung devices will fetch more privately than through a trade-in. The Galaxy S8 gets you $25-75 with every telco depending on the condition of the device, while they’re being sold for about $200 on the Marketplace.
Of course there are upsides to going with a trade-in over a private sale. You have the security of working with a reputable dealer and you don't need to field the constant barrage of lowball offers in your inbox. It can be a stress free way to pass on your old phone if you don't want the hassle of taking on the responsibility yourself.
For the most part, trade-ins are aimed at retaining customers by giving you a chance to upgrade and get something in return for it as well. In some cases, providers even let you out of your contract early if you agree to give the phone back.
The kicker though is that when you trade your device in you’ll need to stay with the same provider in order to reap the rewards. Currently none of the major telcos will let you trade-in your old device without signing up to a new plan - the value will be added as a credit to your account rather than dolled out in cash.
Customer retention is key and providers need to be able to anticipate how much they can make each year so that they can build and maintain their networks. Plus it is cheaper to keep a customer than it is to find a new one. However, if retention is the goal then there are ways to offer a fair reward in exchange for loyalty.
Recently Vodafone launched an offer in collaboration with Apple which saw customers save up to $1000 on the outright price of an iPhone 13, provided that they signed up to a 24-month lock-in contract with the provider. The popularity of this offer on WhistleOut suggests that customers aren’t opposed to committing to a provider if the deal is good enough.
If telcos were to offer market value for the handset in exchange for customers signing up for a contracted term then everyone wins. As it stands, trading in your old device simply won’t get you as much as selling it privately, and it locks you in with that telco once again anyway. It is a terribly one-sided arrangement that providers masquerade as a favour.
In order for me to actively encourage my friends to trade in old devices, I would want to see an equitable exchange. Market value buybacks would be ideal, but this could also come in the form of discounted monthly rates on a contracted plan, or ongoing bonus data on cheap plans that makes these big telco plans competitive with smaller MVNOs.
Whichever way you slice it, trade-ins are a rough deal for customers and they have a way to go before being beneficial. Personally, i’ll stick to the Marketplace.
Anula Wiwatowska
Offsite Editorial Lead | Instagram
Related Articles
