Microsoft recently started a new advertising campaign which truly speaks to the consumers wallet in these troubled economic times. Simply put, the advertisement (can be seen here) states that PCs are cheaper than Macs, and what people are really concerned about these days is price. This ad is very much in line with the recent comments made by Microsoft CEO Steve Ballmer who stated that Mac users are "paying $500 more to get a[n Apple] logo on it". This however is not ground breaking news; the fact that Macs are more expensive (commonly known as the “Apple Tax”) is one of the most common retorts for the PC people in the Mac vs. PC debate. This new advertisement has definitely sparked up this debate quite a bit with articles being featured on Slashdot and Gizmodo, among many other tech sites.
I have found myself in the Mac vs. PC debate quite a few times, generally when a friend asks for advice on buying a new laptop. In general the argument goes as follows, “PCs are cheaper, and the baseline specs are going to be higher, but Macs are known to be more resource efficient so the higher specs don’t necessarily mean a faster machine.” The conversation then generally returns to the issue of price where it is pointed out that a decent low-end Dell or HP laptop can be purchased for $700-$800 whereas with Macs the low-end is $1000-1100. The fun really beings when it is pointed out that while Macs are more expensive they generally have much higher resale value. While this is generally true, it was never clear to me how much higher the resale value actually was, and if that higher resale value actually covers the higher initial cost. That is why I chose to do a little research on the topic to answer the question, are Macs really more expensive than PCs?
In order to determine which laptops are more expensive I would first find popular laptops which were released approximately three years ago, determine the resale value of these laptops today, then determine the “adjusted retail price” which is its initial sale price minus its resale value three years later. The decision to pick laptops which are three years old is twofold, first three years is generally the time frame which many people begin selling their old laptops and looking for new ones. Also, it was about three years ago that Apple switched from PowerPC to Intel. Based on these two factors three years seemed to be the ideal time frame for how old the laptops should be.
Once that time frame was decided upon, I the next task was to find popular laptops which were released around that time. After a little bit of hunting around I found the following laptops:
• Dell Inspiron 1501 ($649), Released 11/2006
• Dell Inspiron e1405 ($779), Released 9/2006
• Apple MacBook Early 2006 ($1099), Released 5/2006
• Apple MacBook Late 2006 ($1099), Released 11/2006
• HP Compaq nc6400 ($1119), Released 9/2006
• Lenovo Thinkpad T60 ($1399), Released 11/2006
These laptops were all released between two and a half and three years ago and are some of the most popular models offered by the given manufacturer at that time.
Now that the laptops were picked their approximate resale value needed to be determined. While there are services which will tell you an approximate value of a laptop I’m not particularly confident in their accuracy. Instead, I wanted to see how much money these laptops would fetch if they were being sold by your average Joe. What better place to look then everyone’s favorite auction site, eBay. Using eBay I then located successfully completed auctions for each model listed above. When picking completed auctions I set aside a few ground rules, it had to be in working order and no large defects (as described by seller), it could not be refurbished, and it could not have a warranty. Considering laptops which violated any of these conditions would have significantly increased the variance in the prices (consider a “for parts” laptop vs. a working laptop with a 2 year warranty).
I chose to sample three auctions for each of the laptop models to try to avoid any oddities in the sale price of a particular laptop. While this is a tiny sample size it was sufficient to get a reasonable estimate for prices, particularly since the sample pool was fairly constrained. It should be noted that some of the auctions for a given laptop model had slightly varying specs (e.g. 60GB vs. 80GB hard drive or 1GB vs. 2GB of RAM) but most were minor modifications likely done by the manufacturer, I avoided any laptops with significantly improved specs (e.g. 4GB RAM). While these improvements were likely paid for by the original buyer, determining how much these improvements cost at the time of purchase is an exercise I am unwilling to subject myself to. As a result, each laptop is considered to cost its base price, and thus the percentage of cost recouped upon resale is an upper bound.
The full results of this experiment have been recorded in this Excel Spreadsheet, they have been summarized in the figure below.
Figure 1 displays the initial sale price of each laptop along with its adjusted price which is simply its initial price minus the resale price. The adjusted price is in effect its “actual” cost assuming the laptop is resold in a working condition three years after it was purchased. From this figure it is clear that while the Dell Inspirons are sold at a considerably lower price point than the Macs, the adjusted price of the two models are very similar, particularly in the case of the e1405 which has a Intel Core 2 Duo processor (as opposed to the AMD Turion in the 1501). This indicates that while the Macs are in fact $200-300 more expensive than Dells, that extra cost is recouped upon resale as a result of Macs increased resale value.
Next is the comparison between the Macs and the pricier PCs, namely the HP and Lenovo models. Both these models had price points above that of the baseline MacBook, with the Lenovo fetching a pricey $1,399. From these results it is clear that the PCs which do cost more than their Mac counter parts do not recoup nearly as much of their value upon resale and result in adjusted prices significantly higher than Macs.
This is illustrated more clearly in Figure 2 which displays what percentage of the initial sale price which was recouped upon resale (higher is better). Three years after being purchased Macs recoup an impressive 51-52% of their initial sale price while Dells net around 36%. The more expensive HP and Lenovo recoup a measly 26-28% of their high initial prices. In the case of the Lenovo, its $1006 adjust price is nearly twice that of the Macs and Dells. In fact, while the HP and Lenovo are nearly double the price of the Dell e1405, they only receive an additional $20 and $120 in resale value.
After seeing these results I am pretty clearly convinced that Macs are not more expensive than PCs. In fact, Macs are very much comparable pricewise to much cheaper Dells when resale price is factored in. Macs are much cheaper than more expensive models sold by HP and Lenovo which do not recoup nearly as much of their high cost upon being resold.
While I’m sure this will not put to an end the Mac vs. PC argument, the old argument about Macs being more expensive is simply not the case, especially when considering higher end PCs.
A special thank you goes out to Bryce Boe who proof read this post for me.