Old smartphones are changing hands more and more liked used cars.
Each round of new devices — the latest expected in September with the debut of the next Galaxy Note and iPhone — leaves upgraders with a still useful old phone that has resale value. And instead of a forgotten spot in a sock drawer, they’re finding new homes in an increasingly popular second-hand market.
Wireless phone companies are more actively promoting trade-ins when customers upgrade to new phones.
Countless online dealers now offer instant bids for “gently used” devices at websites such as sellcell.com, cashforiphones.com, gazelle.com, usell.com and newtonshead.com.
For-sale-by-owner listings pack Craigslist, eBay and Amazon. And a Kansas City-based site called Swappa.com has gotten traction with its efforts to review phones before they’re listed on its site.
“All this speaks to an enormous market for these phones,” said Ben Edwards, who started Swappa in late 2010 as smartphone sales climbed. “These became computers in your pocket. That’s what really made this happen.”
Prices for second-hand phones vary widely.
Instant bids for an Apple iPhone 4S recently ranged from $80 to $235 on Gazelle and USell. Selling the same phone on your own could fetch $220 to $370, based on prices at Swappa and Priceonomics.com
It’s also a bit of a Wild West out there. Buyers need to find out whether a phone has a clean history, which can be revealed through its ESN, or electronic serial number. Think of a bad ESN as akin to the vehicle identification number, or VIN, on a stolen car.
“Sometimes you don’t know what’s under the hood,” said Marci VerBrugge-Rhind, a Sprint Corp. spokeswoman.
The market for old phones is feeding in part off a surge in new phones.
T-Mobile, for example, has introduced an upgrade plan called JUMP. It allows customers to upgrade to a new device as often as twice a year. Other carriers’ upgrade plans may be less frequent, but they all idle old phones while they’re still useful.
It means roughly 135 million phones are discarded each year, according to a federal estimate. Sprint highlighted its efforts to reuse phones with
a recent video
Phone companies certainly will take your old device, offering to credit your account and find a new home for the device or recycle it.
Sprint says four out of 10 customers upgrading at its stores trade in an old phone.
Some of those phones end up at eRecyclingCorps., a Texas company that works with a dozen carriers globally. The company took in 1.1 million trade-ins from carriers in May, and 16 million since it started in 2009.
About 95 percent can be resold, said Kelly Carnago, chief carrier opertions officer at eRecycling.
They are first “wiped clean” of the original owners’ information and refurbished at a plant in Bloomington, Ind. Unusable phones are recycled for the precious metals and other components.
Good ones find their way back to consumers, here or abroad. Carriers, for example, use them as replacements under warranty plans or sell them as “certified” pre-owned phones; eRecycling also sells refurbished phones to retailers and wholesalers.
Some go to the federal government’s Lifeline phone program that provides phones and service to qualified families.
Lots of cellphones, however, are sold online by their owners in search of a bit more than they’ll get as a trade-in from a wireless company.
And that gives other consumers a chance to already have a phone when they sign up for wireless service. Bring your own device, so to speak.
“BYOD is a big wave,” said consultant Berge Ayvazian at HeavyReading.com.
It allows a consumer to buy service month to month rather than under a two-year contract. It means lower monthly bills and the freedom to change phones and carriers when you want to.
Four years ago, Moses Ntiono paid T-Mobile about $400 for an HTC Windows phone.
This summer, he decided to upgrade in the second-hand market. New phones cost too much.
Ntiono, 27, landed a used Samsung Galaxy S III, pebble blue, for $350 at KayJay Solutions near the Crossroads Shopping Center in Olathe. He even got $80 for his old HTC phone.
Lower prices were available online, but Ntiono worried about getting a bad phone.
“Maybe somebody steals that phone and sells it on Craigslist,” he said. “You’re stuck with it, and it’s never going to work.”
Wireless companies work to prevent stolen phones from being used as cellphones. They do this by keeping track of each phone’s unique electronic serial number.
Report your phone as lost or stolen, and its ESN ends up on a blacklist, meaning phone companies won’t activate it for phone service.
So, phone shoppers need to verify a phone’s ESN and its status before buying.
It’s a little tricky to find a phone’s ESN, some of which are a mix of letters and numbers and some just numbers.
One way is to use the phone’s keypad. Punch in *#06# and a long serial number should pop up on the screen. If that doesn’t work, you may need to open the device and look beneath its battery.
Armed with an ESN, visit a phone store or call a phone company’s customer service number to find out whether the phone can be activated.
KayJay checks ESNs whenever it takes in a phone, said owner Kelly Nzive, who opened a second store in Kansas City, Kan., two months ago.
“At the same time we can guarantee our products,” he said.
Does the battery take and hold a charge? Does the earbud socket work? Any water damage? It’s the kind of checklist any shopper should put a phone through.
Swappa tries to do a lot of that without handling the phone.
A seller who posts a phone on the site has to attest that it works and provide the ESN to Swappa. Its staff reviews each posting and checks ESNs to verify the phone can be activated and matches the brand and model of the device pictured.
As with cars, the bargaining point on most used phone deals is price. It pays to shop whether buying or selling a device.
Instant bids are available at Gazelle.com, USell.com and many more that pop up from a Web search.
One of them is DiggyMobile.com. Steve Wiley and Ethan Malone, friends since high school, set it up a couple of years ago but have bought and sold phones for five years.
In mid-May, Wiley started selling on Swappa. In less than four months, he sold 56 phones for a total of $21,188.
Swappa collected $10 for each sale. Wiley said his profit was about $2,000, or 10 percent.
“It used to be a lot more than that when I started,” the Delaware resident said.
That means sellers are collecting more of the resale value of their phones.
The website Priceonomics.com helps consumers figure out what their phone might bring online. It checks cellphone prices on Craigslist, eBay and Amazon and posts an “acceptable price range” for various devices.
For example, an Apple iPhone 4S with 16 gigabytes of internal storage is worth between $238 and $276, according to the site, and a 16-gig Samsung Galaxy S III is worth $351 to $401.
The site suggests thinking about resale value when buying a new phone. It says iPhones hold their value longer.
As if ESNs and resale values weren’t enough, cellphones come with an added problem. They’re locked onto the wireless carrier that first issued them to a customer.
Get a phone from Sprint and it is programmed to work only on Sprint’s network, though it runs on the same CDMA technology as Verizon’s network. Ditto for AT’s and T-Mobile’s networks that share another technology called GSM.
For less than $100, websites offer an unlock code so you can take your phone to a different network.
Swappa’s Edwards said one reason used T-Mobile phones sell for more than Sprint phones is because they can be unlocked and sold overseas where GSM technology dominates.
Unlocking was business as usual until January when a government finding declared unlocking illegal. President Barack Obama rebutted that finding and said it should be legal. And Congress was working this month on a bill to ensure it is legal.
Consider this dispute. Wireless carriers are battling what attorney James Baldinger calls illegal “trafficking” in stolen and otherwise ill-gotten cellphones typically to markets overseas.
“It’s a big, big business,” said Baldinger, a former industry executive who represents carriers in lawsuits. “I’ve filed over 200 of these cases in the last eight years.”
The list includes one that Sprint brought against a Kansas City, Kan., company called the Middle Man Inc. Middle Man denies in court filings that it is engaged in the practice, arguing that Sprint has lumped it unfairly with real perpetrators.
One issue in the case could have an impact industry-wide, said David Marcus, Middle Man’s attorney. He said Sprint claims that the “terms and conditions” of its two-year service contracts forbid customers from selling their phones.
“If Sprint gets this, I think it could be fatal to the industry” of reselling phones, Marcus said.
Baldinger said Marcus “completely misstates Sprint’s position” in the lawsuit. The terms and conditions are written to prevent illegal trafficking, he said.
Sprint and other carriers don’t care if customers get an upgrade and sell their old phones. The industry encourages reuse.
Ready to ship
To sell your phone online often means shipping it to the buyer. Take these steps before sealing the box.
• Read the manual to see how to erase all your photos, text messages, contacts and other personal data and to reset the phone to factory settings.
• Make sure your phone bill is paid in full and your service is deactivated or transferred to another device.
On the web
Here are names of some other websites that deal in cellphones
• Set the password on your phone to 0000 or the buyer will cut the price you receive.
• Run the battery down completely and leave it inside the phone.
• Tape over the contacts on any extra batteries you ship.