Why Best Buy’s Buyback Program Bites

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NEW YORK (MainStreet) —  No matter how much you spend on a new gadget, and regardless of how earth-shattering it may seem right now, the truth is that it will be considered old hat in about two years. That fact makes it particularly expensive for consumers to keep up to date with new technology. But now, one major electronics retailer is looking to change that.

Best Buy (Stock Quote: BBY) launched a new buyback program this week, which allows customers to trade in any laptop, netbook, tablet or cell phone they bought at the store within two years (and televisions within four years) to receive up to half the cost of the product back in the form of a Best Buy gift card.

“We recognize that technology is changing faster than ever, and our customers tell us they want to enjoy these devices without worrying about when the next or newest version will launch,” said Brian Dunn, CEO of Best Buy. “We call this ‘future-proofing’ because our customers can now have more confidence that they’re protecting the value of the products they’re purchasing today."

Obviously though, there’s a catch. In fact, there are a couple.

To take advantage of the program, consumers must sign up for “Buy Back protection” when they purchase a new gadget, an option that costs $69.99. But wait, according to a Best Buy spokesperson, you have to pay that fee for every type of gadget you want to “protect,” it’s not a one-time fee valid for all items you purchase from Best Buy.  Moreover, the amount that you are likely to get back drops significantly the longer you have the product. According to the company’s press release, you only have a shot at getting up to 50% back in the first six months after purchase. After that, the maximum amount you can get drops by 10% of the original price every six months, so that a year and a half out, you’re looking at a maximum return of 20% or less. And, oh yeah, did we mention you’re getting it back as a gift card, and not as actual cash?

In effect, you are basically signing up for a new kind of extended warranty program, except this one is not a warranty for you breaking the product, but rather an insurance policy for when you lose interest in it. But just like with any extended warranty, there’s no guarantee this will actually save you money in the end.

Let’s say you purchase a 16 gigabyte iPhone 4 this week for $200, and then decide you no longer want it in the next year because a newer model comes out, or simply because you want to switch to a Verizon iPhone. If you purchased Buy Back protection, that means you would be entitled to somewhere between 40%-50% of the initial price ($80-$100), but when you factor in the $69.99 you paid for the option to sell it back, the maximum amount you would gross in this scenario would be about $30. And you would have to spend it at Best Buy anyway rather than putting it in your pocket. You might get a DVD out of the transaction, but little else.

By comparison, if you sell your used iPhone 4 online, you should be able to get at least $100, if not more than you paid for the device originally.

On the other hand, this deal may work out well for more expensive items like 3-D televisions and pricey laptops, where 40%-50% back can amount to several thousand dollars. That said, Best Buy explicitly notes that only products that cost less than $5,000 qualify for buyback.

Regardless, the one who really comes out on top in this deal is Best Buy, which now has a new and improved way to get consumers to keep spending on new products.

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