iPhone 1.0: Sell it while it's hot

Editor’s Note: The following article is reprinted from PC World.

If you were thinking of selling your first-generation Apple iPhone to help finance the purchase of a new 3G model, you might want to do it right now. Like, today.

At this moment, on the eve of the 3G iPhone’s launch, original iPhones are commanding upward of $350 on eBay. But some observers believe that those prices will drop rapidly as an anticipated legion of iPhone 1.0 owners upgrade to the new version and put their used handsets on the market.

In fact, Aaron Vronko is banking on steep price declines for used 1.0 iPhones. Vronko is service manager at RapidRepair, a Kalamazoo, Mich.-based store that fixes and refurbishes iPhones (as well as iPods, Zunes, and a couple of other high-profile gadgets). RapidRepair buys and sells a lot of iPhones, Vronko said, and the store has posted a standing iPhone buyback offer of $125 for a fully functional 8GB model—and an offer of $150 for the 16GB version.

Vronko has observed the spirited auctions and elevated final prices for 1.0 iPhones in recent days, but “we don’t think they’re going to stay that high,” he said. On the other hand, he doesn’t think that those prices will go into the dumpster, either.

“For a ton of reasons there are going to be a lot more sellers and buyers than usual for a used phone,” he predicts.

Buyers and Sellers

Who’s going to buy? Domestically, older iPhones may appeal to people who like the handset but are ineligible for AT&T’s subsidized 3G iPhone prices—or who simply don’t want to pay the higher data service fees that AT&T has announced. (AT&T will continue to charge $20 a month for unlimited data on the older models, but it’s going to demand $30 a month for the newer ones).

Vronko plans to make money selling used and refurbished iPhones overseas, in places where people can’t get iPhones from their carrier (the new iPhones won’t be as easy to unlock for use on unauthorized carriers).

China, for example, isn’t among the 72 countries that Apple plans to ship 3G iPhones to by the end of the year—and Vronko says that the iPhone is a huge status symbol in China. “We’ve already got a contact there who has said, ‘I want every iPhone you can get me,’” Vronko said.

Attractive upgrade deals

Counterbalancing the demand, Vronko believes, will be a glut of used first-generation iPhones unwanted by owners who are eager to upgrade to the newer model at the subsidized price. “Their warranties either have run out or are about to run out, and if you can sell your original phone for $100, that makes [the upgrade] a whole lot cheaper,” Vronko said.

“The iPhone is the first phone where the secondary market for it is going to be massive compared to what it is for other phones,” he added.

Gartner analyst Ken Dulaney generally agrees with Vronko’s analysis. “The likelihood of the installed base turning over to the new iPhone is high,” he said. That’s because many of the 5 million or so people who bought the first-generation iPhone were “the kind of people that will own the latest and greatest of anything,” he added.

The subsidized pricing will be a big draw, too, he said. Admittedly, some current iPhone owners may not want to sign on for the higher data charges just to get GPS and mobile broadband, which Dulaney views as the principal improvements.

But even if only 30 percent of current iPhone owners upgrade, “that’s still substantial,” Dulaney said. And he agrees with Vronko that the market value of a used iPhone will remain higher than the market value of most other used-phone models. “This is probably unique,” he said.

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