Macopinion

Finessing The Computer Depreciation Game

One of the most discouraging things about computers, iPods, iPhones, and other consumer electronics is that they depreciate on a curve whose trajectory resembles that of a falling rock - even worse than cars. I hate depreciation. It's the biggest reason I've never bought a new car, and probably never will. The prospect of $5,000 or more in equity value evaporating as soon as I drive it off the dealer's lot is a powerful deterrent. My current fleet of rolling stock includes a 1990 Toyota Camry, a 1989 Corolla, and a 1994 Mazda B-4000 4x4 pickup, all of which provide reasonably dependable and relatively affordable transportation with depreciation hardly a factor.

Unfortunately, while a ten-year-old (or more) automobile can still be excellent, few-compromises transportation, a ten year old computer is a poor platform for anything but the least demanding tasks. It's part of the price we pay for a rapidly advancing technology, but I still detest watching the value of anything I buy melt away with every tick of the clock.

On the other hand, as with my collection of elderly vehicles, by buying used (or refurbished) you can make depreciation work in your favor.

For example, my current number-one workhorse computer is a 1.33 GHz 17" PowerBook - a model that was introduced in September, 2003, with a list price of U.S.$2999.99. Too rich for my blood in '03, but the price had dropped to $1,499.00 as an Apple Certified Refurbished unit when I purchased it in February, 2006, representing a 50% saving off the price new. Over the ensuing 17 months, the value of this machine has diminished by another $300 or so, which isn't too bad. I'm certainly getting a lot less hosed by depreciation than I would be with a new MacBook or MacBook Pro.

Of course, I'm not getting Core 2 Duo performance, but the G4 is still plenty lively enough for my needs in practical terms, and after 18 months using what is essentially now a nearly four-year-old design, I'm still not feeling at all cramped or that my workflow is being slowed down or inhibited by using this computer for production.

Indeed, I'm still spending a lot of production time (for example right now) on my number two computer, a 550 MHz G4 upgraded Pismo PowerBook, which has truly proved a depreciation-beater, especially for those of us who purchased ours used. I got mine when it was a year old in October, 2001, for the equivalent (it was a trade) of about $1,400.00, and that included auxiliary Zip and SuperDisk expansion bay modules. It's hard to but a value on this computer today, because it's been hotrodded with a RAM upgrade, a G4 processor upgrade, and several other add-ons, it's getting a bit long in the tooth, needs the CCFL backlight tube replaced, and so forth, but it still works great and at this point, who cares? I've gotten so much use out of it, it really owes me nothing.

However, for folks who bought new Pismos back in 2000, they initially depreciated about 45% in the first year.

High-end PowerBooks were traditionally fast depreciators, partly because their prices were artificially inflated to begin with. Early adopters of the high-end WallStreet 292 MHz G3 Series 'Books paid $5,599 for the privilege in 1998. A year later you could buy a refurb. WallStreet 300 MHz machine for $2,000. That represented a mind-numbing $3,600 (64.3 percent) depreciation over ONE YEAR. What other high-ticket consumer commodity depreciates 60 to 70 percent over two years? None that I can think of even comes close.

This freefall depreciation of high-end Apple notebooks has been less pronounced in the aluminum PowerBook and MacBook Pro era. A year-old Revision A 17" MacBook Pro still commands about $1,800 - $2,000 refurbished or used, which is still $800 - $1,000 depreciation over one year, but that's a lot better than $3,600! Of course this partly reflects the lower selling price of high end notebooks these days, but you could still buy a new low-end MacBook and throw it away at the end of a year for only a little more than you will lose on depreciation on a 17" MacBook Pro over the same interval.

Starting at a lower price point is crucial to minimizing the depreciation bite. One way to do this is to buy a computer with a lower price point like a MacBook, so long as it has the power and features to do what you need to do with it.

Another angle is to make depreciation work for you. The flip-side of the depreciation equation is that you can buy a computer that was the cutting edge a year or two ago, and that still has plenty of potential, for a very attractive price today.

Consequently, my provisional philosophy has been to buy low-end if I'm going new, and high-end if I'm buying used or refurbished. I've purchased three brand new 'Books over the past 11 years, and they were all the least-expensive model in their family at the time - a base, grayscale screen PowerBook 5300, a 233 MHz PDQ WallStreet, and a 700 MHz G3 CD-ROM iBook. Conversely, my used/refurb. machines have been high-end spec. models - 500 MHz Pismos and a 17" PowerBook G4. Respectively, I've minimized my depreciation losses on new hardware and maximized my advantage form depreciation when purchasing used.

Works for me.

Does it make sense to buy, say, a refurb 15" 2.16 GHz Core 2 Duo MacBook Pro for $1,600 when you can get very respectably equipped new 2.0 GHz Core 2 Duo MacBook $1,099? Maybe. The MacBook Pro still has some very cool features, expandability, and video muscle than you get on the MacBook. Apple Certified Refurbished computers have an identical 12-month warranty and the same AppleCare extension eligibility as new Macs. I've never regretted buying either my Pismo or 17" PowerBook compared with contemporaneous new hardware at the time of purchase.

Early adopters who buy high-end machines - the cutting edge of the cutting edge if you will - have always gotten hosed a lot worse that those who go for the more modest low-end versions of the same model.

One other consideration; one of my offspring bought one of the very last Lombard 333 MHz machines back in February, 2000, and at times regretted not waiting another month and picking up a 400 MHz Pismo with DVD, a 100 MHz system bus, and a full MB of cache for the same money. Apple tends to release notebook revisions fairly reliably in April-May and October-November, so if you are not desperate for a new machine, perhaps the safest plan is to wait until the next new revision is introduced before making your final decision.

On the other hand, buying a computer at the end rather than the beginning of its production run usually means that bugs and teething problems that often afflict early-production units will have been ironed out.



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cmoore@macopinion.com


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