10-23-13 8:09 AM EDT | Email Article

By Quentin Fottrell


Many iPhone users have a simple incentive to upgrade to the latest model once their two-year contract expires: They can sell the old model for roughly the cost of the new one. Here's the surprising thing: iPad owners, who aren't on two-year contracts, and don't have the same incentives, are upgrading even more often.


Apple (AAPL) just announced its new iPad Air. But many of the people offering their current models up for sale on resale sites only purchased their devices in the past 12 to 18 months, according to new research by resale sites Gazelle and NextWorth. After Apple sent out invitations to the launch, the most recent two iPad upgrades (from 2012) made up 64% of all iPad trade-ins at Gazelle. The latest iPad models released in November 2012 comprised 34% of the models traded in, while the March 2012 iPad made up less than that (30%). Last year's iPads made up 54% of all trade-ins on NextWorth, more than half of which were the iPad 4 and iPad Mini.


"Consumers are expecting a major body change," says Anthony Scarsella, chief gadget officer at Gazelle. And while the iPad 5 may (or may not) come in gold, consumers are betting on fingerprint technology instead of having to input a code to open their tablet. Trade-ins surged over 320% on Gazelle last week, Scarsella says. What's more, people want the best of the iPad 4 and iPad Mini combined. People like the slimness and portability of the iPad Mini, he says, but want that sleek design in the larger iPad. And while the Mini is easy to read on-the-go, it doesn't have retina display.


Launched in 2010, iPads are also three years younger than iPhones. "They are still closer to the early adoption phase then iPhones, so there is a segment of customers that will always upgrade to the latest and greatest device," says Brian Colello, analyst with Morningstar. The iPad's relative youth makes it harder to determine how often customers will replace their tablets, he says. In Apple's third quarter, which ended in June, sales of iPads fell 27% to $6.3 billion. Apple's share of the tablet market also fell to 32% in the second quarter of 2013 from 60% a year ago, according to research firm IDC.


While many consumers still appear eager to upgrade, analysts say Apple needs to make sure that the flashy new features of the iPad 5 will boost sales--and push more trade-ins of previous models. As iPad saturation increases, it will get tougher to persuade customers to buy new ones. Some 60% of teenagers already own an iPad, according to a recent survey of over 8,640 respondents by Piper Jaffray analyst Gene Munster, and 52% intended to buy a new iPad within the next six months. However, only 8% own an iPad Mini and just 12% say they intend to buy the new iPad Mini when it's released.


For now, the resale market for iPads is still robust, says Yung Trang, president of TechBargains.com, a deal aggregator, even though it's easier to trade in old iPhones. Unlike iPhones, consumers can't buy subsidized iPads on two-year contracts and actually make a profit when they upgrade to the latest model, but used 32 gigabyte iPad 4s are currently selling on eBay for approximately $450 versus $599 for a new version. "That's a great incentive to upgrade to the new model when it comes out," Trang says. (Gazelle offers $275 for a mint condition 32GB iPad 4.)


(Also see: How to get the new iPhone for free http://www.marketwatch.com/story/how-to-get-the-new-iphone-for-free-2013-09-11.)

-Quentin Fottrell; 415-439-6400; AskNewswires@dowjones.com


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10-23-13 0809ET

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