Second-hand iPhone market going strong, Apple and carriers don't mind

Here is a question for you, iPhone owners: after buying your iPhone, what did you do with your old handset? If you simply gave it away to a friend or relative, then you are among the majority. In fact, nearly two thirds of used phones end up as gifts, according to a recent study conducted by Consumer Intelligence Research Partners (CIRP).

The study also reveals that after the iPhone 4S was released, 53 percent of the people who bought it introduced their previous phone to the second-hand market by either giving it away or selling it. And as much as 49 percent of those phones were previous iPhone models (probably even ones with broken displays), while BlackBerries and Android smartphones account for only 21 and 15 percent respectively.

Here is how CIRP co-founder Mike Levin explains why the second-hand iPhone market is flourishing:

“We think the secondary market for the iPhone is more established, since iPhone has the longest track record for a single device/platform, and for many it is the aspirational entry-point smartphone,... iPhones also had the advantage of having a useful second life as iPod touch substitutes, which made their used value a little clearer from the start. As a GSM phone, AT&T iPhones also could be [unlocked] for use on other GSM networks, so there was an early secondary market for iPhones on other carriers — though this was, of course, limited to more savvy and aggressive technology consumers.”

And yes, the majority of those used iPhones do get activated on a wireless carrier – as much as 87 percent of them. It is even estimated that 11 and 12 percent out of AT&T and Verizon iPhones in use respectively are, in fact, second-hand devices. This phenomenon is actually quite beneficial to carriers as they do not need to pay subsidy for those devices, which is an estimated $400 per iPhone. After putting these numbers into perspective, CIRP concludes that AT&T and Verizon may have saved between $400 and $800 million so far.

But what about Apple? Well, the company that gave us the iPhone may be losing money because people buy used units instead of new ones, but there is a bright side to that as well. First of all, those users do consume content and purchase software on those iPhones, so Apple is still making money from them. Additionally, owning a second-hand iPhone is very likely to motivate one to purchase the latest model once it hits the market. It is good for brand loyalty too! In a nutshell, the benefits for Apple outnumber the drawbacks.

How many of you would gladly use a second-hand iPhone if it was given as a gift to you? And what about buying a used one? Feel free to share your thoughts with us in the comments below.