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The Consumer Technology Upgrade Cycle – What You Need To Know

technology upgradeThe consumer technology upgrade cycle is relentless and potentially very costly. Apple comes out with new models of their iPhone and iPad on a yearly basis and the likes of Samsung and Nokia are the same. While the cycle may seem faster given the popularity of Apple products, this phenomenon has been around for a long time.

We need a new laptop. It’s been 4 years or so since I got my current HP and it is starting to show its age. The battery hasn’t held a charge for a year, some of the USB ports have stopped working and there have been a couple of scares when it has crashed unexpectedly. Replacing the battery isn’t worth it as batteries for this model are hard to come by and super expensive.

My wife has been pushing to get a new one for 4 or 5 months but my cheap side has resisted thus far.

My rationale: The computer still works and does what we need it to.

My wife’s rationale: The computer is dying a slow death, we can’t actually use it as a laptop because the battery is dead and there is much better technology available.

So to attack the issue from a different angle, my wife put it to me like this. “You’ve had this laptop for 4 years, how much has it cost per year?” This question made me think about the big picture, the technology upgrade cycle.

The Upgrade Cycle

With technology constantly advancing, the old is replaced by the new at a staggering pace. Consumers are constantly churning through gadgets; my wife and I are no different. I think the previously mentioned laptop cost around $1,200 when it was first purchased which works out to about $300 per year. This seems like a pretty reasonable number to me. If I had replaced the laptop after only 2 years, when the battery first died, it would have cost me $600 per year, that’s a fair difference.

I wrote a post over at Boomer & Echo which discusses the tech upgrade cycle and how seductive it can be. To expand on this subject, here’s an expanded table showing common tech purchases many people make. I’ve prepared two upgrade scenarios, “slow” and “fast”.

Slow Upgrade Cycle

Fast Upgrade Cycle

Product Type

Price Years before upgrading Cost Per year Years before upgrading Cost Per year
TV (Samsung 55″)

$1,300

6

$217

4

$325

PC (Lenovo ThinkPad T430 14″)

$1,080

4

$270

2

$540

Digital Camera – Point and shoot (Nikon Coolpix S800)

$280

5

$56

3

$93

Digital Camera – DSLR (Nikon D3200)

$700

5

$140

3

$233

Smart Phone (iPhone 5, 32GB, unlocked

$799

4

$200

2

$400

Tablet (iPad, 32GB, wifi only)

$599

3

$200

2

$300

eReader (Kobo)

$130

3

$43

2

$65

Total

$4,888

$1,125

$1,956

Note: These prices do not include tax

I’ve never taken the time to put numbers to the tech upgrade cycle so this was an especially interesting exercise. The number of years one owns something before upgrading will vary widely from person to person but the different mentalities involved are the same. There are those who don’t mind using some outdated gadgets and those who like to have the latest and greatest. I’ve had my iPhone 3GS for around 3.5 years now!

Related: Apple Stock Update And My Decision To Sell

As you can see from the table, by upgrading your electronics sooner as illustrated in the “fast” upgrade cycle, you will pay an extra $830 (42.5%) more per year to own these devices.  Many of these products are middle of the road in terms of price. If you went for high end TV’s, PCs and cameras, this gap would be much wider, it can easily get up to over $1,000 per year.

So you have to ask yourself, is keeping up with the latest and greatest gear worth the premium? For many, the answer might very well be yes, and this is ok. However this can become an issue when:

1)      You take on debt or delay debt repayment in order afford your upgrades

2)      You are not building savings

Related: The Basics – Saving

That extra $1,000 per year can make a difference.

Yes it is possible to sell these devices second hand and recoup some of the cost but technology depreciates quickly.

Related: The Cost Of Keeping Up With The iPhone

Expectations

While the extra yearly spending might not make a huge difference to your bottom line, there is another major factor which may be overlooked, and that is expectations. Those that are used to a fast gadget upgrade cycle may also have the same expectations for other things like clothes and cars. Compressing your car upgrade cycle can be extremely costly as it is a big expenditure.

Once our expectations are set, it is very hard to change them.

Upgrading your gadgets is fun, but realize that by raising your expectations and compressing the cycle you will incur a lot more cost. This is compounded over many years and is harder to reverse as one ages.

Don’t get sucked in.

To conclude, after owning our laptop for 4 years, it’s time for an upgrade. We’ve gotten our money’s worth out of this one!

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7 Responses to "The Consumer Technology Upgrade Cycle – What You Need To Know"

  1. Bet Crooks says:

    Your cost analysis is interesting and valuable. As someone who is probably much older than you what really makes me cringe, though, is the total tech spending of $5000 (after tax, more or less) every 6 years. And your list doesn’t even include the cost of monthly cell phone bills, internet access bills, etc. While I LOVE many of the new technologies, I’m glad we didn’t have them when I was starting out. Instead, the same money went into savings for Uni and then the future. Aside from good cameras, there just wasn’t that much tech out there. CR TVs last forever. Do new cameras and TVs give better rez? No doubt about it. But the cost is so high, especially for those just starting their careers. In some ways we may have created a monster….

  2. Andrew says:

    Hi Bet, you are quite right, we have created a monster! My parents had an old CRT TV for 12 years or so before it started to die. There is just so much tech these days that unless we slow the cycle down our resources will be siphoned away.

    Sometimes I wish times were simpler and saving was more straight forward. Those just starting out in life need to face the reality that they can’t afford all these nice things right out of school. Whatever happened to getting second hand furniture from family to furnish a first home!

  3. Maria says:

    Thanks for a great post.

    Another way to save money on technology is to buy last year’s model. For example, I got an unlocked Samsung Galaxy Note I for $480. An unlocked Samsung Galaxy Note II would have cost at least $650.

    See: http://www.telegraph.co.uk/technology/news/9746136/Save-money-buy-last-years-gadgets.html

  4. Mark says:

    I have chosen to upgrade certain “gadgets” over the years. It helps if you buy the a desirable gaget in the first place, look after it (I even keep the original boxes if I have space) and then pass it on while it has some residual value. The best experiences I have had with this are Apple products. Yes there are more expensive on the original purchase, but they have excellent re-sale. With some products I have gotten about 40-50% of original price after 2 years. Recently I sold my Canadian ipad2 I had for exactly 2 years. Was in great shape, but the battery was not 100% and the home button stuck every now and then. As a bonus, I now live in Amsterdam and sold the used ipad2 (which is still for sale so you have something to compare the price too) for 50% of the european retail price, which was 60% of the original canadian price! Not bad for a product I used almost every day for 2 years. Mind you I also own a 40 euro Nokia phone, so you have to pick and choose.
    Mark.

    • Andrew says:

      Good points on resale value, 50% is pretty good for 2 years old!

      Another Canuck abroad! Hope you are enjoying your new city.

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