Trade In & Upgrade: How Buying a Cell Phone Is Like Visiting a Car Dealership

When buying a new car, trading in an old one is often part of the deal. Now, when consumers feel the need to upgrade their cell phones, it's easy to trade in or sell their old handsets at the same store where they're making their new purchase—including retailers like Kmart, Target, Office Depot, and RadioShack.

USA Today reports that many of these retailers now have buy-back operations—and that many of these operations are actively expanding. Instead of selling the used phones in the same way that car dealerships sell new and used vehicles alongside each other, retailers typically partner up with online gadget marketplaces such as NextWorth and Gazelle, which then handles the job of selling the used handsets online. Gazelle's founder offers an explanation for why retailers are getting into the trade-in business:

"For decades, when you bought a new car, you brought in your old model to trade in," says Israel Ganot, Gazelle's founder. "That hasn't existed in consumer electronics, until recently. Now the retailer can generate foot traffic, sell the new item for less and offer their consumers a way to recycle."

For the retailer, this is about foot traffic. For the consumer, it's mostly about convenience—after all, it's only slightly more difficult for you to sell your old handset directly in an online marketplace. It's unclear what kind of money consumers are given when trading in old phones at Target or RadioShack, but it's a pretty good assumption that—as with car dealerships—you're not commanding top dollar when you're selling to a middle man.

Regardless, all the action in the resale market means that more and more used handsets are being sold, and that consumers hunting for bargains on used phones have their pick. SmartMoney says that the upheaval caused by news of Verizon selling the iPhone, combined with the abundance of places for consumers to buy and sell older-model phones, means that it's a cinch to buy a handset for significantly less than it'd cost for a brand-new model without being locked into a wireless contract:

As supply increases in coming weeks and some formerly-hot handsets age out of favor, resale prices are likely drop by another $30 for Android phones and another $60 for other smartphones, says Delly Tamer, the chief executive of LetsTalk. Even though the average Motorola Droid X is selling for $310 on eBay right now -- $110 more than the price for new contracts -- someone who needed to replace say, a damaged phone mid-contract would still save 46% compared with buying a new one directly from Verizon.

Where are the biggest bargains to be found? Pretty much where you'd expect: The older the handset, the cheaper the price. Whereas the newest BlackBerry retailers for over $500, one that was top-of-the-line two years ago can be had for around $50 now. And while the older models may not have the features or sex appeal of their hotter contemporaries, used phones tend to handle the main functions just fine. Gazelle's Ganot told USA Today:

"We buy the latest and greatest, and don't know what to do with the old stuff anymore. But they still work really well."

They work really well, the price is right, and you're not paying a premium for the high of showing off your fancy brand-new purchase: You could say all of these things about used cars, or used handsets.