Subsidized, Off Contract, Unlocked and why so many people get confused over these things...

[anon(4698833)]

I don't know if you're like me, but in the past when I've sold an iPhone, I have been met with one of the most annoying parts of making that transaction, and that is the complete lack of understanding from so many people about how iPhone pricing and value works. I want to put this out there so that at least some people who may fall into that category can be educated a little more on the subject.

How many of you have tried selling a used iPhone but have been met with people who can't understand why a used iPhone would cost more than the brand new iPhone they saw at the carrier store for sometimes as much as HALF the cost? We're going to take a look at that now.

Let's start with the basics...there are really 2 ways you can buy an iPhone...

1.) Subsidized

2.) Un-subsidized.

...now what does that word mean exactly? I could give you the definition, but let's approach this from a layman's perspective...Subsidized simply means (in terms of the iPhone) that you will get the device at a discounted rate if you agree to sign a contract with whatever carrier you are purchasing the phone from. In the case of the iPhone, the subsidized pricing is as follows for a new iPhone 5S (in the US market):

2 Year contract
16GB = $199
32GB = $299
64GB = $399

...it's very straight forward...if you give them 2 years of paid service, they will give you a pretty substantial discount on the phone. Within that though, you are required to complete 2 years worth of service, or pay a contract termination fee (which, depending on which portion of the contract you are in, covers the carrier's side of things by requiring you to pay for the rest of the discount they afforded you). There are lots of rules and regulations, and there are certain qualifications you must meet to get these prices, but those details are more appropriate in a different thread, this is just covering the basics.

So what does UN-subsidized mean? It's very simple, it means that you are not agreeing to a contract with the carrier, and thus you are not receiving any discount on the device. The UN-subsidized pricing for the iPhone 5S (in the US market) is as follows:

16GB = $649
32GB = $749
64GB = $849

...essentially, you're buying the iPhone 5S flat out, no contract, no obligation and, most importantly, NO DISCOUNT.

So let's talk about the VALUE of the iPhone.

What does all this mean as far as value goes on the iPhone? Well, this is where most people get confused, and I'll try to explain it as clearly and simply as possible...

!!!SUBSIDIZED PRICING HAS ZERO BEARING ON THE VALUE OF AN iPHONE!!!

You might ask "How is that possible?" and the answer is really simple...an iPhone follows consumer market trends like any other device, to put it simply, the iPhone loses it's value based on AGE and OBSCURITY vs. anything else. When an iPhone gets old and the features that it has become outdated...the iPhone drops in value. Now this is not to say that every iPhone that drops in value is obsolete, it is just to say that the value of the device itself follows that pattern. Just like most cars, when it gets old and the mileage starts running up, the value of it diminishes down to a "plateau" point (or a point where the pricing just levels off and does not raise or lower).

So what's the point of all of this? Well, let's talk about that...you now understand the difference between the subsidized and UN-subsidized pricing of an iPhone 5S, so how do we determine VALUE? That's a tricky subject, because you begin to factor in condition, storage size and about 100 other things that are detrimental to how much someone is willing to PAY for a device...things as simple as location of the phone (some cities have more people willing to spend premium money than others), and even the time of year (like right now, just before the release of a new device, values typically drop)...

At this point, people might ask "So why would someone ask $500 for an iPhone I can get for $199 at AT&T?", and this is where we get to the meat and potatoes of our thread...the iPhone's value should be based off it's UN-subsidized pricing, because when you buy it from a private seller, you are not entering into a contract, you are not obligating any time at all to a carrier, and you should approach it with the idea that the device you are about to purchase started out with a value of $649, and progressed downward from that point based on all the factors that diminish value (again...age, storage size, condition, location, etc).

I hope this helped clarify pricing you may see online for iPhones. I can't tell you how irritating it is when you post a device for sale only to have people come back with "But I can get it for $200 at AT&T, why would I give you $"X" amount?" It's really simple, but so many seem so confused by it. Take a moment to understand these two very different types of cost on the iPhone and you will make your life, and the lives of those selling devices INFINITELY easier and less frustrating.

 

[anon(4698833)]

(cont.)

UNLOCKED iPHONES

I wanted to separate this from the bulk of the other thread because it's a really simple understanding...any phone that is purchased in an unsubsidized manner can be unlocked via your carrier. Typically, about a month after the initial release, these phones are sold via Apple and come unlocked out of the box, but for the first few weeks (and possibly even after), if you buy an unsubsidized phone from a carrier store or from Apple, you will have to contact your carrier to have it manually unlocked.

Again, ANY unsubsidized iPhone that is sold can be unlocked.

 

[Jaguarr40]

@ Mods & John Yester,
As most all of the great info Sean is always willing to share with the members I believe that this thread should be stickied because this is concise good info that many members can better understand. Please consider placing this in the Sticky area.
Thank you and thank you for sharing Sean!

 

[bahandi]

I'm going to "argue" semantics here and replace your use of "value" with worth.

Value, to me, is subjective, in that one person may value something at a greater value than others would.

Many people are quickly trying to sell of their iPhone 5s in hope of getting enough cash to purchase the 5S. Prices of a 16g iPhone 5 range from $350 - $600.

At this point in the game, whether a few weeks old or a year old, I value a 16 iPhone 5 at no more than $400. Although the phone may be worth more than that, I don't see the value in it.

 

[anon(4698833)]

I'm going to "argue" semantics here and replace your use of "value" with worth.

Value, to me, is subjective, in that one person may value something at a greater value than others would.

Many people are quickly trying to sell of their iPhone 5s in hope of getting enough cash to purchase the 5S. Prices of a 16g iPhone 5 range from $350 - $600.

At this point in the game, whether a few weeks old or a year old, I value a 16 iPhone 5 at no more than $400. Although the phone may be worth more than that, I don't see the value in it.

I understand your logic, but "Value" and "Worth" by definition are mirrors...and I think anyone reading the thread would clearly understand that we are talking monetary value and not personal value. One could argue the other side of the coin to...I have a fan on my desk that is worth WAY more than what I paid for it, but it's value is really only a few bucks. Like you said, semantics.

 

[Jaguarr40]

@ Mods & John Yester,
As most all of the great info Sean is always willing to share with the members I believe that this thread should be stickied because this is concise good info that many members can better understand. Please consider placing this in the Sticky area.
Thank you and thank you for sharing Sean!

I tried my friend, I think it has good and concise info in it to benefit many people. I will appeal to someone else and see what he thinks.

 

[Just_Me_D]

Outstanding information, Sean. Thank you for taking the time to write it for us. It is indeed appreciated, sir...