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02/20/98- Updated 09:59 AM ET
Used PCs can lead to big savings
They say a new car loses a third of its value once a buyer drives it off the lot.
That's nothing, though, next to the price plummet a new computer undergoes. So like used-car buyers, computer shoppers who resist a factory-fresh aroma can save big by buying second-hand.
Penny-pinching consumers and home-based businesses bought nearly 4.8 million used computers in 1996 and 1995, according to the latest figures from Computer Intelligence in La Jolla, Calif.
And a growing number of retailers, from small independents to superstores, are setting up used-computer showrooms.
''You buy a used one, it's half the price,'' said Mike Tomaszewicz, a University of Delaware student shopping at Second Source, a used-computer dealer in Newark, Del.
Perhaps it's even less than half. At Computer Renaissance in Talleyville, Del., owner Jeff Jackson thumbs through his industry's bible, the Blue Book on Computers from Arizona-based Orion Research Corp. - a price guide like those for used cars.
Jackson points out a listing for a 1996 Hewlett-Packard Pavilion 7125. Loaded with goodies, this model sold new for $2,490 - a cutting-edge machine in its day. Today, it retails at about $720.
Just last year, a low-end Compaq Presario 8702 sold new for $1,040. Current price: $445. For PCs fresh out of the box, ''the price drops 60 to 75% in the first three months,'' Jackson said.
''It's the progress of technology. It makes a new computer old in a few months,'' Tomaszewicz said.
Manufacturers rush to bring out faster and more powerful machines; an industry rule of thumb says that the power of new computers doubles every 18 months. In turn, software makers quickly write new programs that call for the latest hardware.
Computer price slides seem to be accelerating, too. A year ago, Jackson said, used machines averaged $900. Now, his prices on used computers start below $200 and average less than $500.
That follows price drops last year on new models from Compaq, International Business Machines and Hewlett-Packard, with list prices as low as $800. More than 40% of new computers now cost less than $1,000, according to California researchers Dataquest Inc.
''As new computers get to be really cheap, the whole thing shifts downward,'' said analyst Roger Kay of International Data Corp. in Framingham, Mass.
New or used, cheaper computers bring new buyers into the market. ''Somebody living in a trailer park in Michigan will now buy a computer that they wouldn't have before,'' Kay said.
Also, the price cuts make a second home computer more affordable - a computer just for the kids, say. ''You just paid $3,000 for a Pentium 300, and you don't want the 9-year-old with his peanut butter and jelly sandwich in front of the keyboard,'' said manager Richard ''Chip'' Greenstein of Computer Renaissance.
In a way, used-computer dealers stand to benefit from stepped-up sales of new machines.
As sales of new low-cost machines increase, so do the number of computers returned to stores. Often, computers are returned not for any defect but simply because novices can't figure out how to make them work.
Even so, the returned computers can't be sold as new. Instead, they're labeled ''refurbished'' and sold wholesale to used-computer dealers. Besides customers' returns, dealers may stock shelves with manufacturers' close-outs, with refurbished computers once leased by businesses, or with models traded in by consumers.
Some such machines - which otherwise might be headed for landfills - sell at rock-bottom prices.
At Computer Renaissance, $179 might buy a PC powered by one of Intel Corp.'s musty 386 processors, two generations behind today's Pentium chips. It comes with an early version of the Windows operating system, with word-processing software, a monitor and even a primitive printer.
A museum piece to computer cognoscenti, the 386 is still fine for, say, writing letters. However, finding new software for the old machine would be virtually impossible.
That's the trade-off that may come with a second-hand machine: It may lack more than just bells and whistles.
Of used PCs sold in the first half of 1997, 35% were driven by 386 or older chips, said analyst Dave Tremblay of Computer Intelligence. More than 46% lacked a CD-ROM drive, and 69% had no modem.
Another trade-off: New machines usually come with a three-year warranty, while second-hand shop warranties may be as short as 90 days unless customers pay more to extend them.
Still, it's a computer for $179; at that price, it's hard to complain much. It's a great deal for first-time buyers, dealer Jackson said, and ''hey, if you like it you can trade up.'' Computer Renaissance uses Orion's Blue Book as a basis for trade-in values.
''First-time buyers continue to be enamored with used PCs,'' Tremblay said. Repeat buyers are more likely to buy a new PC, perhaps because they're hungrier for speed and power.
On the other hand, 28% of first-time buyers picked up second-hand computers last year, up from 23% in 1996.
In turn, more retailers are offering used machines. Johnson opened his Computer Renaissance store in November; with nearly 200 stores now open, the Minneapolis-based franchise is launching new outlets at about one each week. Venerable Second Source, 10 years in the business, has two company-owned stores in Delaware and four franchises in Pennsylvania.
Computer superstores have largely stayed out of the used-PC game, but that may be changing. Tandy Corp.'s Computer City plans this year to open its so-called Value Centers - store departments devoted to blow-out items such as refurbished PCs and discontinued models.
And the Internet has become a venue for used-computer sales. Manufacturers such as Compaq sell their own ''refurbs'' via Web sites.
Scores of other sites host computer auctions, taking bids online. Publicly traded Onsale Inc. of Mountain View, Calif., auctions off refurbs and close-out models around the clock.
There may not be much more room for big players, analyst Kay said. As PC prices drop, ''I don't think there's enough profit opportunity to attract a lot of big vendors,'' he said.
On the other hand, ''it's enough to feed a mom-and-pop business on a local level,'' he said. ''I actually told my younger brother it was an opportunity for him to get into business.''
By Dale Dallabrida, Wilmington News Journal |
