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 The Depreciation Game22 May 2001 by Charles Moore Contributing Columnist print format | email this story | talk
One of the baneful things about computers is that they depreciate on a curve whose trajectory resembles that of a falling rock -- even worse than cars. I hate depreciation. That's the reason I have never bought a new car, and never will. Unfortunately, while a ten-year-old automobile can still be excellent, no-compromises transportation, a ten year old computer is a poor vehicle for anything but the least demanding tasks. It's 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. 
For example, a year ago, the PowerBook Pismo 500 MHz was selling for $3,495.00, and its lower-end 400 MHz sibling, $2,495.00. I was able to find new, leftover examples of these machines this week on the Web for $2,499.00 and $1,699.00 respectively. That means even a still brand new Pismo with a full warranty has depreciated $800 to $1000 in one year. Real world prices for used Pismos would be roughly $1,450 and $1,950 (400/500), which would represent depreciation of $1,045 (42%) and $1,545 (46%) respectively in the first year -- in the second case more than the selling price of a new iBook with DVD. On the other hand, the going price for used Revision B iBooks is around $999, down from a list price new of $1,599 -- or depreciation of $600 (37.5%) over one year -- much better retention of value with the lower-priced machine, which is typical. By buying a less expensive computer, you will almost always do better not only in cash numbers but also percentage-wise. 
The upshot is that you could buy a new iBook and throw it away at the end of a year, and still be ahead money compared with buying a new, high-end PowerBook and eating the depreciation. 
High-end PowerBooks have traditionally been especially fast depreciators, partly because their prices were grossly and artificially inflated to begin with. Early adopters of the high-end WallStreet 292 MHz G3 Series 'Books were paying $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, even worse than the 3400c/240's 57.5 percent freefall in its first 12 months. What other high-ticket consumer commodity depreciates 60 to 70 percent over two years? None that I can think of even comes close. 
When I used to sell Mercury outboard motors about 20 years ago, there were 7.5 HP model and 9.8 HP models that looked externally identical, but the 9.8 sold for several hundred dollars more. One afternoon when business was slow, out of curiosity I decided to compare the microfiche parts lists for the two models and see what the difference was. I was only able to find two or three different part numbers between the two models -- the carburetor high-speed jet and either the intake or exhaust manifold or perhaps both (it's been a long time and I didn't take notes). Anyway, it was clear that the price difference between the two Mercurys was pure marketing, since the cost of manufacture had to be virtually identical. Apple did much the same thing with the PowerBook 5300. The top-of-the-line 5300ce originally retailed back in 1995 for a suck-in-your-breath $6,499, while the middle-of-the-line 5300c/100 with 8MB of RAM and a 500MB listed at $3,699, and the16MB of RAM and 750MB hard disk version went for $4,499. The passive matrix color 5300cs was $2,799, and the Grayscale base model $2,199. That's a $4,300 spread between the base 5300 and the top-end 5300ce. 
For your $4,300 you got four things different: the main one was a 10.4" 800 x 600 active matrix display, but also a slightly faster 117MHz (vs. 100 MHz) processor (however, the base, grayscale 5300 was still faster because of its lower processor demands), a larger 1.1 Gig HD instead of 500 MB, and 24 Mb more RAM. This wasn't quite the ripoff that it sounds like by today's standards. The tweaked processor probably didn't cost Apple that much more, but the Super VGA active matrix screen and the extra RAM were very expensive back in 1995. I will return to this issue of high-end vs. low-end value later in this discussion. 
The 3400c was a pretty nice laptop, but the fact that it was essentially a "stretch" version of the 5300 design-wise, using many of the same plastics, made its astronomical introductory price tag pretty hard to swallow. Early adopters of the $6,000 3400/240 MHz, which was for about six months the fastest laptop in the world, were amply justified in feeling that they got hosed with a paper loss of $4,580 over 24 months. Fortunately, since the introduction of the Lombard at $2,495/$3,495, PowerBooks have started at a somewhat more reasonable level than those earlier 'Books did, but the new iBook still makes them look pretty pricy. 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 the new iBook, 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. On the other hand, the only older Mac portable that can hold its own speed-wise with the new iBook is the Pismo, and it is still selling for more money, although I think that current used PowerBook prices are, with the introduction of the new iBook at its lower price points, a bit like Wile E. Coyote having run off the edge of a cliff just before he looks down. Prices for leftover/refurb/used Pismos and Lombards are bunching up in the $1,300 - $2,000 range. Does it make sense to buy, say, a refurb Pismo 400 MHz for $1,600 when you can get a new iBook $1,299? For some hands-on observations on the new iBook by a Pismo owner, check out this article by PowerBook Central's Joe Kallo: http://www.powerbookcentral.com/columns/jkallo/051501.shtml Early adopters who buy high-end machines -- the cutting edge of the cutting edge -- have always gotten hosed a lot worse that those who go for the more modest low-end versions of the same model. One way to have a reasonably current machine while cutting your depreciation losses is to buy your computer at the end of its production run. For example, back in February, MacWarehouse Canada was selling of end of the line Pismos for Can$2,499 (about US$1,650), and Can$2,999 (about US$1,975) for the 400 MHz and 500 MHz models respectively, including a bonus 64 MB RAM upgrade. I actually ordered one of the 500 MHz machines, but unfortunately got shut out in a buyer stampede. One issue to consider; my son bought one of the very last Lombard 333 machines in February, 2000, and has 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.. Perhaps the safest plan is to wait until the new model is introduced before making your final choice. 
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. Those late Pismo buyers can take some satisfaction in having avoided the gaggle of annoyances and glitches that seem to be afflicting the early TiBooks.  Messages
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 Charles Moore is a freelance journalist and commentator by profession, and has written for 40 or so different magazines and newspapers in the U.S., Canada, the U.K., and Australia over the past dozen years. He has syndicated columns with Continental News Service of San Diego, California, and with Barquentine Ventures Newsfeatures in Canada. Charles is also an associate editor (freelance) with a couple of monthly magazines, and writes software reviews and features for MacToday magazine.
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