From...

November 16, 1998
Web posted at: 5:40 PM ET

by Dan Miller

(IDG) -- The harsh truth about buying a computer: Your PC is obsolete the instant you open the box. Now several leading mail-order PC vendors are trying to relieve some of the sting by allowing buyers to trade in their old systems for new ones.

The latest PC maker to dangle a trade-in deal is Micron. Its new MPower program invites small and medium-size businesses to trade in Pentium-class PCs (from any one of ten major vendors, including Apple) for a shiny new Micron box. Earlier this year, Gateway launched YourWare, a similar program that targets individual consumers; YourWare offers trade-in rebates, too, but only for Gateway systems. For its part, Dell has quietly been offering trade-in programs to big businesses for years.

Like leasing, trade-in policies help buyers keep the latest technology on their desktops. But beware: You could end up spending more money packing and mailing your old PC than you reap in rebate.

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Array of services

Micron's MPower program covers an array of services, including financing, leasing, and trade-in credit for old PCs. Rebates are based on the Orion Blue Book, a standard guide to the value of used computers. Micron will pay for shipping costs and will even send you the necessary packaging. The company also accepts older systems (486s and worse) -- which it recycles -- but only in quantities of five or more.

Gateway's YourWare program is far more consumer-focused: For as little as $50 a month, you get a PC or notebook (from the G-series, Destination, or Solo product lines) plus access to the Internet via gateway.net. You also gain the right to trade in your old PC toward a new purchase, anytime between two and four years from its purchase date. Gateway credits you the used PC's Orion Blue Book value.

Dell has been offering to take in old PCs for years. The company's "asset recovery services" take two forms: First, Dell will pay "competitive" rates for used 486/50s and above. The catch: It will do so only for customers who turn in 20 "units" (CPU, monitor, laptop, or printer) or 10 complete systems at a time. Second, customers with older systems or fewer units can send them to Dell for recycling. The charge: $25 to $35 per unit.

Shrinking PC values

So do trade-ins make any sense? That depends on your system's age, since a computer loses its value more rapidly than almost any other consumer product. Roger Rohrs, publisher of the Orion Blue Book, estimates that the fair market value of a two-year-old computer is 15 to 20 percent of its original price. So a Micron Millennia P200 (with 16MB of RAM and a 1.6GB hard drive) that cost $2000 two years ago is worth $300 to $400 on today's market. Apply that amount toward a new Micron, and you've got a good discount.

But if that system is three or more years old, the rebates shrink dramatically: The same Millennia might be worth only $100 -- or less. Read the fine print, and you will discover that, though Micron pays for shipping at trade-in time, the company charges a "processing fee" of $25 per system up front to cover the eventual cost of shipping and inspection. Meanwhile, Gateway charges for the entire amount of shipping. Throw in the cost of the labor required to pack your PC, and the rebate might not cover the expense of returning it.

Leasing vs. trade-in

Though the specifics vary, in practice, trade-in and leasing programs yield similar results. In both cases, you send the old PC back and (the vendor hopes) then upgrade to the latest technology. If you always want the latest, greatest machine on your desk, which option makes more sense?

It's impossible to generalize, but consider one situation. Let's say you want a Millennia P450 minitower from Micron. The company would lease the $1799 system to you for about $62 a month, for a total cost over two years of $1488. If you bought it with a credit card charging 13.9 percent interest and paid it off over those same two years, you'd pay about $86 a month -- or $2064 overall. Even if you received a 20 percent rebate (roughly $360), leasing is a better deal. But if you keep the PC for three years, the balance shifts: You'd pay $2232 to lease, $2210 to buy, and about $2100 to buy and then trade it in.

These numbers will vary significantly depending on your particulars -- the interest rate you're paying, the duration of your loan, how long you intend to keep the PC, and what you plan to do with it once that time is up. So get out your magnifying glass and slide rule, read the fine print, and do the math for yourself.