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Don’t buy into exchange offers

Don’t buy into exchange offers

Exchange offers are heavily advertised, as if you would be foolish not to avail of them, but, unless there is no secondary market for this product, it’s the poorest offer you’re likely to get.

Nearly every phone and car manufacturer has exchange offers lined up. The offers take up the front pages of newspapers and pop-up on websites. Tempting as they are made to seem, exchange offers always offer very poor value. The reasons are clear. If you, let’s say, exchanged your Galaxy S3 for an iPhone 4, what is Apple to do with a Samsung product? We won’t bother to speculate, but we can safely assume that it isn’t looking to turn a profit by selling another company’s phones. As a result, what they offer you is closer to junk value than the real second-hand value on the phone.

Active secondary market
When there is an active second-hand market for a product, this is where you’ll get best value. For smartphones and cars, for example, there already is a very active second-hand market. You could go to a dealer or even put up advertisements on Quikr or Olx for great value for your phone. Unless it’s in terrible condition, you should be able to find its true worth by using one of these channels. On the other hand, the buyback schemes offer terrible value-for-money. For example, Apple is currently offering Rs7,000 off on a new iPhone 4, but only if you trade it in for some of the most high-end phones available. These high-end phones include Galaxy S3 and the HTC One. For any cheaper phone, the discount you’ll receive will be much lower.

The same goes for cars. It wouldn’t take much effort or waiting to find a good price for your car. Even three- to four-year-old models of hatchbacks would find a second-hand price in six digits. Yet, car manufacturers are only offering what appears to be scrap value on cars. For example, you can trade in any car for a paltry Rs20,000 in exchange for the Maruti WagonR, which starts from Rs3.5lakhs, while Volkswagen is offering just Rs10,000 if you want a new Polo Comfortline, which starts at Rs 5.40 lakhs.

No secondary market
The exchange offers aren’t any better when there’s no secondary market, of course. For example, currently, IFB is offering just Rs1200 for your old microwave in exchange for some of its models. Given that there is no real secondary market for a microwave, you might have no choice but take it. Unless you’re willing to put up a listing on a classifieds website like Olx or Quikr, for which you might never receive a response, this is the best offer you’re going to get. The same goes for clothes. It’s not as often that you’ll come across such a deal, but denim brands occasionally offer them. Most recently, Pepe Jeans was offering a discount of up to Rs500 if you turned in your old pair for a new Pepe.

So the next time you come across an advertisement for an exchange offer, always ask yourself if there is a second-hand market. If there is, it’s quite likely that the process will be hassle-free and offer more value than any exchange offer. You could then use the proceeds of the sale to simply buy yourself the new smartphone or car that was being advertised.

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