New cars are notorious for losing value the moment you drive them off the lot. But video games, smartphones, computers and electronics, jewelry, books and baby clothes are all things that lose value fast as well. Consumer goods that lose value tend to have excess supply or go obsolete fast. Video games, jewelry, books and baby clothes are examples of products that constantly glut the market. Smartphones and other electronics are always being made obsolete by newer versions.
1. Video Games
Most games drop about 30% of their resale value as soon as the shrink wrap comes off. The values continue to plummet sharply in the ensuing days and weeks.
For example, Call of Duty: Advanced Warfare is one of the best selling video games of 2014. Released in November of 2014, used copies had lost 28% of their value within four months. The price for the PS4 version new is $38.95 on Amazon. Used on eBay there are dozens of offers for $28.
Another top selling game, EA Sports’ Madden NFL 15 sells for $38.95 at Walmart. After a few months, copies of the football video game were likewise available on eBay for $28.50. That’s a 27% drop.
This $38.95 video game can be found on eBay for nearly 30% less.
Even more recently, Sony released the video game Bloodborne on March 24th of 2015 to critical acclaim. The game retailed for $59.99 on Amazon. Only nine days later, copies of the game could be had on eBay for $50.00. A 17% drop in just over a week.
Why do games lose so much of their value so fast? Copies of new video games are a commodity. Game companies print millions of copies, and within a few days, most buyers have played the games through to their conclusion. The glut of used, unwanted copies on the market makes video games shed value rapidly. The solution of course is patience. Anyone who can wait even a week after the release of a new video game before buying a copy can save 10% of their money or more.
This Samsung Galaxy Note 4 goes for $845 out of contract from AT&T, or 43% less barely used.
2. Smartphones
Smartphones are another type of consumer product that don’t retain their value very well. For example, the popular Samsung Galaxy Note 4 with its metal frame and 805 quad-cord processor retails for $845.99 out of contract. Several listings on both Amazon and eBay sell the phone used for around $480. That’s a loss of 43% the moment it leaves the store.
Another big seller, the Google Nexus 6, came out right around Christmas of 2014 and was priced at $649 for the 32GB version and $699 for the 64GB version. Just a few months later, the phone is available for 26% less on eBay. That’s a big drop for a phone that was just introduced a short time before.
iPhones fare slightly better. The iPhone 6 16GB version retails for $649.99 from AT&T with no contract. Used on eBay and Amazon, offers for the phone start at $549. That’s a loss in value of 21%. That may not seem like much difference from the Google Nexus 6’s price drop, but the iPhone 6 was released three months earlier, so there’s been more time for the luster to wear off.
iPhones still lose value. Just not quite as fast.
There are several possible reasons smartphones lose value so rapidly. The biggest is probably that there’s always a new version out there. If sellers of used phones didn’t drop their prices there’d be no reason for anyone to buy second hand. Another is availability. There are enough people who upgrade as soon as they can to glut the market with used phones that aren’t all that old.
A couple possible solutions to smartphone value shrinkage suggest themselves. One is buying used phones, but that may feel funny to some. A phone, unlike a video game, can spend a lot of time pressed up against its owner’s face. Another solution is holding onto a current phone a little bit longer. While this won’t lower the price of the next upgrade, someone who pays $199.99 for a new iPhone once every four years under contract will pay 50% less than someone who upgrades every two years. Even in 2015 there are still people out there making good use of the iPhone 4.
So far the Dell XPS13 Ultrabook is still holding value fairly well.
3. Computers and Electronics
Laptops, tablets and desktop computers lose value fast, and for the same reasons as smartphones. New versions of electronic equipment hit the market on a regular basis, often with big upgrades to speed, memory and screen quality.
The highest reviewed tablet on Amazon is the Samsung Galaxy Tab 4, 8-inch, selling for $199. Used the tablet sells for $151.49 on Amazon – a 25% price drop.
The Dell Latitude E7440 Ultrabook, one of 2014’s favorite models, originally sold for $1,340 new. A few months later, prices range around $650 used at various markets online. A 51% drop in a fairly short time.
There are exceptions. The Dell XPS 13 is 2015’s Ultrabook darling. The computer lists for $1,049 on Amazon brand new. Used, there are offers in the neighborhood of $975 at both eBay and Amazon. That’s only a 7% drop, but then again the machine was only introduced a few weeks ago. Apple computers and tablets do okay at holding value also. A 2010 MacBook Pro, loaded, originally sold for $2,300. Refurbished, the same machine goes for $1,289 on Google shopping. That’s a 44% price drop. Not bad for a five year old machine, considering last year’s Dell lost 7% more than that.
Battling depreciation in the world of electronics can be tough, but buying top brands and keeping equipment in good repair can help. Apple products tend to hold value because they come with a “cool factor” that doesn’t fade as easily with time. Holding onto all accessories, cables, manuals and packaging materials can go a long way toward convincing a buyer the product has been well cared for.
Buy this ring for $10,000.
4. Jewelry
Jewelry, especially diamond engagement rings, tends to lose value fast. A one carat diamond ring with a platinum setting and wedding band that sells for $10,000 might fetch only 10% of that later on. In fact, a one carat white gold ring that sells for $10,000 at J.C. Penney can be found for $799 on eBay – a precipitous drop. Salespeople in jewelry stores will claim their diamond rings are worth what they’re being sold for. The truth is, diamonds aren’t all that rare, and engagement rings are extremely common. Sadly, a trip to any pawn shop will turn up dozens of good quality diamond engagement rings for prices far lower than retail. A google search for divorce statistics will explain why.
Buy the same ring as above for $9,201 less the day after the divorce.
If diamond engagement rings lose their value so quickly, then why do they cost so much new? One reason might be, what woman wants a used engagement ring, and what man wants to feel cheap when popping the question?
Other jewelry and gemstones lose their value quickly as well. Contrary to popular belief, jewelry is not a good investment. The exception is when the artist or craftsmanship have something special about them that makes a specific item scarce. A ring by Cartier might hold value better than one from Jared. Estate jewelry can hold or even gain value too, particularly in the case of antiques or items owned by celebrities.
Note the used price of one penny.
5. Books
Books are a terrible investment. The New York Times bestseller The Shoemaker’s Wife sells at Amazon for $11.58 new, but there are several offers of used copies for a penny on the site. Some newer books and hardcovers hold their value for a while, but once a paperback reaches its six month birthday, its dollar value is essentially gone.
Books are a non-perishable commodity. While millions of copies of a bestselling paperback might be printed, most will be unwanted in a few months. Like video games, the lifespan of a book often outlives its usefulness to the original owner fairly fast. Compounding this situation is the ascension of ebooks, which can’t be sold used at all.
A notable exception is first editions, antique books and collectibles, which gain value rather than losing it. A copy of John James Audubon’s Birds of America sold for $11.5 million in 2010.
This used diaper has actually gained value.
6. Baby Clothes
Baby clothes are another product that outlives their usefulness. Most outfits will only fit a baby for a few months before they’re outgrown. Many parents wind up with trash bags and boxes brimming with jammies and onesies and tee shirts and other outfits. Goodwill stores overflow with baby clothes, many of which have only been worn once, if at all.
Recycling websites like Freecycle.org let parents dump baby clothes and other unwanted items so those who need them don’t have to buy them new.
Some baby items do hold their value. High quality cloth diapers like BumGenius come in collectible editions that actually gain value over time.
Why Some Products Lose Value
In general, consumer goods lose their value fast when there’s a lot of them or when better versions become available. Games, jewelry, books and baby clothes are all examples of used items that exist in such overwhelming quantities that their prices drop fast once they’re removed from the packaging. Smartphones, computers and other electronics are all items that are continually made obsolete by newer, better versions hitting the market.
It’s a good idea to buy many of these items used. Paying 25% to 50% more just for that “new” feeling makes sense only to those with a lot of disposable income. Otherwise, buying these items new makes sense in cases where the products are of high quality, come with exceptional warranties, or have a “cool” factor.
Return this LL Bean jacket forty years from now and they’ll replace it. Good return policies help products hold value.
Sporting goods tend to lose value quickly, but brands like Patagonia, Outdoor Research and LL Bean come with lifetime guarantees that make those brands hold value better than others. Anyone can walk into LL Bean with any one of their products, no matter if it’s fifty years old and has been put through an industrial blender, and get a replacement. The same no-strings lifetime guaranties follow products from Patagonia and Outdoor Research. Therefore, people selling items with those brand names used can set higher prices.
Apple products and Harley Davidson motorcycles carry a cool factor that gives them premium prices when new but also lets them keep their value better than other similar products from other brands.
Sources
- Are Diamonds Really Rare? – International Gem Society
- NOTEBOOKS.COM CES 2015 EXCELLENCE AWARDS: THE BEST NOTEBOOKS & ACCESSORIES – Notebooks.com