A smartphone depreciates in value by 15% per year. If purchased for $1,200, what will its value be after 3 years? - Databee Business Systems
Understanding Smartphone Depreciation: How a $1,200 Phone Loses Value by 15% Annually
Understanding Smartphone Depreciation: How a $1,200 Phone Loses Value by 15% Annually
When you buy a smartphone today, understanding its depreciation can help you make smarter financial and purchasing decisions—especially if resale value matters. One common trend is that smartphones lose value steadily over time, typically depreciating by 15% per year. But how does that actually work in real terms?
What Does 15% Annual Depreciation Mean?
Understanding the Context
A 15% annual depreciation means that each year, your smartphone’s resale value drops by 15% based on projected market conditions, usage, and technology obsolescence. Unlike cars, which may lose value quickly in the first few years, smartphones depreciate predictably but steadily over time—often following a geometric decline rather than a linear drop.
Starting Value: $1,200
If your phone was purchased for $1,200, here’s how its value decreases annually for 3 years:
-
After Year 1:
Depreciation = $1,200 × 15% = $180
Value = $1,200 – $180 = $1,020 -
After Year 2:
Depreciation = $1,020 × 15% = $153
Value = $1,020 – $153 = $867
Key Insights
- After Year 3:
Depreciation = $867 × 15% = $130.05
Value = $867 – $130.05 = $736.95
Summary After 3 Years
Purchasing a smartphone for $1,200 results in an estimated $736.95 after 3 years of 15% annual depreciation.
Why This Matters to Buyers and Sellers
- Resale planning: Knowing depreciation helps set realistic expectations when selling your device in 1–3 years.
- Financial strategy: Avoiding overpaying based on short-term value assumptions preserves long-term gains.
- Technology trends: Regular upgrades boost depreciation speed, making early purchases particularly susceptible to sharp value drops.
While 15% is a simple estimate, actual resale value depends on condition, brand reputation, software updates, and market demand. Still, understanding this depreciation pattern empowers smarter decisions in the fast-evolving smartphone market.
Looking to maximize your smartphone’s lifetime value? Plan accordingly—and account for depreciation early.
