Why are cell phones so cheap on ebay?

April 9, 2007 6:40 AM

Why are the phones on ebay so cheap? I can't see where the profit comes from.

I'm shopping for a new cellphone, and I figured I might as well look for a phone on ebay. But they're so cheap, I'm skeptical - what's the catch? I understand that some of these sellers require that you sign up for a plan at the same time. Even without those, though, there seem to be a ton of phones that are selling very cheaply (say, sub-$20, including shipping). So is there enough demand for these that the sellers can count on bidding to jack prices way up? Or is there some non-obvious catch I'm missing? (Or an obvious catch that I'm too dumb to see.)

posted by spaceman_spiff to shopping (13 answers total)

Whenever I sell things on Ebay I always start very low - in my experience the low price attracts more watchers who will be alerted right before the auction ends, this raising the final price since 95% of the action happens in the last hour. Alternatively, when I price an auction near to where I believe it will end it rarely attracts any attention and/or sells. I sell mostly tech things so it may be the same with cell phones.

Pricing aside, are you sure these phones are all from professional sellers? Most people have cell phones, and most are the proud owners of bricks should their contracts end or change. A large number of people with phones that they suddenly cannot use might explain the low starting prices.
posted by datacenter refugee at 7:07 AM on April 9, 2007

I'd imagine some are locked to a particular cell provider or are previously used and mishandled. What sort of phones are you looking at? Not all cell phones are expensive, especially if they're a couple years old or the variety often attached to pay-as-you-go plans.
posted by mikeh at 7:13 AM on April 9, 2007

Older, used cell phones have barely any value at all. I've got two right here that I cannot give away. One of these days I'll take the battery down to the recycler and throw them away.
posted by unixrat at 7:16 AM on April 9, 2007

Are you looking at low starting prices or low ending prices? The price before the auction ends isn't relevant. You can mark the checkbox on the left side that says "Completed listings" to see what the ending prices are for a set of search results.
posted by reeddavid at 7:21 AM on April 9, 2007

I knew of a guy who used to go into San Francisco and buy huge quantities of old cellphones at some sort of repo auction for pennies on the dollar. He would then sell them on ebay for more than he bought them, but still at a hugely discounted price. This might be the same technique employed by the sellers you are looking at.
posted by billysumday at 7:25 AM on April 9, 2007

When you buy a phone through the normal channels the price you pay covers the development cost of the phone as well as the profit margin of the manufacturer and the distributor/network provider. The actual production cost of the thing is minimal...

Consider also that a lot of phones are returned within contractual cooling off periods and these can no longer be sold as new. It is not difficult to get a phone unlocked from previous network providers...you can buy the kits online, too.

Just follow the normal ebay rules - use a seller with a lot of good feedback, be sure you read the description fully/clarify any potential queries before you bid.
posted by koahiatamadl at 7:36 AM on April 9, 2007

I've bought all my phones (other than the very first one) on eBay and I think there's a definite market inefficiency; you can get a lot more bang for your buck buying used. To such an extreme that biannual cellphone "replacement plans" are largely pointless.

It's mainly what unixrat says - people just don't have any use for their old phone once they get a new one. Often they are locked to a certain provider, this is true, but there is such a huge selection that you can narrow it down to phones that are compatible with your service and still have a bazillion options.

The only hitch is that sometimes a really cheap phone will be stolen and so the provider won't be able to turn it on. To avoid this, only buy from people with lots of good feedback and no recent negative feedback. Other than that, there's no catch; I've bought 3 phones in a row on eBay, all for under $100 (sometimes well under), and had no problems at all.
posted by rkent at 8:15 AM on April 9, 2007

I just checked out ebay's cellphones and ~95% are older model phones (ie, not teh new hawtness) and pretty cheap. The other 5% are the newer models and are buy it nowed for ridiculous sums.

Basically, if you don't need the newest, coolest gadget phone, buy it off ebay from a decent seller.

I'm with verizon and I just passed the two year mark and will just use my phone until its dead (should be soon). I believe if I just buy my next phone off ebay then I will effectively be on a month-to-month contract and can bail whenever I want. Not too shabby.
posted by premortem at 8:30 AM on April 9, 2007

I recently "bought" a brand new Treo 700 via ebay that was tied to a 2 year contract with Sprint. "Bought" is in quotes because I paid $100 with a $100 rebate, so essentially- free. If I went through Sprint [with contract and same phone] it would have been at least $250. I'm still not quite sure anyone is making money, but I'm happy.
posted by yeti at 9:09 AM on April 9, 2007

A lot of phones on eBay are stolen.
posted by reklaw at 11:09 AM on April 9, 2007

A lot of phones on eBay are stolen.

Yes, but people who buy stolen phones (and can't get them turned on) are quick to leave negative feedback and people who sell stolen phones don't last long. It is a problem but it's easy to avoid if you're careful as a buyer.
posted by rkent at 11:18 AM on April 9, 2007

I am in the process of buying a phone on ebay. It's not the latest model, and the manufacturer seems to be selling off old inventory to liquidators. For a lot of people, cell phone blingage, in the form of gadgetry or new styling, is a big deal. So the older models lose value. The person selling the phone (the phone I hope is on its way to me) that I'm buying says that got it free with contract renewal and didn't need it because they bought a different phone already. There were many of the same model all over ebay. The buy-it-now pricing seemed to be lower than the auction pricing.
posted by theora55 at 2:02 PM on April 9, 2007

unixrat and others with old, unwanted phones you can't seem to give away -- there are many charities who are eager for donations of old phones.
posted by Smilla's Sense of Snark at 3:24 PM on April 9, 2007 [1 favorite]