How to turn your mobile phone into easy money

We are a wasteful lot. Britons buy more than 30 million mobile phones each year, keeping them for an average of 18 months before casting them aside in favour of something new, thin and perhaps unexpectedly bendy. But in leaving them hanging around, we're missing a trick. There's money (or vouchers) to be had by selling those handsets to the growing number of phone-recycling companies willing to pay for them.

Some are based on the high street. Would-be sellers can walk into CeX, Game and numerous supermarkets, have them assess their phones for damage, offer a price and leave with a tidy bounty. But so many more are on the internet, from Fonebank and Mazuma Mobile to Simply Drop and Phone Recycle Bank. With these, it's a case of popping the phone into a protective package, sending it away and receiving a payment a few days later.

According to Ashley Turner, the co-founder of the gadget price-comparison website CompareMyMobile.com, around 60 mobile-phone recycling companies have set up online in the UK over the past five years. "The market is pretty healthy," he says. For "recycling" read "reselling", given that there is, it would seem, a healthy profit to be made from even the oldest, most damaged of phones.

When a phone is handed to one of these companies, an assessor will spend anything from 30 seconds to four minutes checking it for faults, potential water damage and cosmetic blemishes. Expensive handsets made by premium brands may be given new screens to increase their value, but phones that are excessively damaged will be dismantled. Their batteries, camera modules, speakers and mainboards will be removed and most likely used to repair broken handsets, which can then be sold on.

Very old phones are mined for precious metals with even the gold and copper from SIM cards being sent to refineries to be smelted down. And it's a business that is growing. Redeem, which has emerged as a market leader in the industry, now collects some 150,000 mobiles each month and employs 300 processing staff in Falkirk, Manchester and Burton upon Trent.

The company runs the Envirofone and Money4URMobile brands and has recently been re-awarded the lucrative contract for O2 Recycle, and has a turnover of some £70m. "If it is worth extending the life of a product, we will do that," says Richard Mavers, Redeem's head of client marketing. "We put them back on the market and sell them into the wholesale market – so that's everything from online retailers to high-street shops."

Many of the phones collected by such companies are sent abroad, with recyclers profiting from bulk sales. Cash In Your Gadgets sells 80 per cent of its stock to Africa, the Middle East, Eastern Europe and developing countries where there is a strong appetite for affordable smartphones. But a good number are sold back to the UK public.

A black, 16GB, unlocked, mint-condition Samsung Galaxy S5, for instance, will be bought for £246 cash or exchanged for a £297 store voucher at CeX. It will be sold to the public for £425. Refurbished handsets are also frequently offered to people who need their own phone repaired. "It's really about dealing with as many people as we can, providing the best service and moving the devices through quickly, adding value where possible," says Ashley Payne, the director of Cash In Your Gadgets.

For most of us, though, this matters little. What really counts is getting the best price possible; no easy task when prices vary so wildly. A search for an iPhone 5 16GB model on CompareMyMobile.com, for example, showed 15 companies offering anything from a paltry £87 to a more reasonable £150, and a similar search on MobileValuer.com displayed eight results, with a top payment of £165, as long as you were willing to accept an Argos voucher.

But that's before drilling down further. The top prices are reserved for mint-condition phones, and some firms want cables and boxes, while others do not. Better prices are achievable just before a new phone is announced, and often a few weeks later. Some companies will price-match; others won't. Some will give extra if you accept vouchers for the likes of Amazon or Argos, as we've seen. And phones locked to a particular network can see the price offer tumble by some £30 or £40 (though, thankfully, you can ask your network provider to unlock it for free before you sell – a solid, top tip).

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For many, the recycling companies provide the easiest way to get rid of unwanted devices. The alternative is a private sale, typically through eBay, but while it can be more lucrative – "It usually adds 10 to 20 per cent," says Guy Anker, the managing editor of MoneySavingExpert.com – it can also be more hassle. "Half the trick of eBay is knowing when to put it on," he says. "But you also need to write a listing, set a price, work out postage, pay fees and deal with people and any potential problems. I'd sacrifice a bit of money and go for the ease."

Not that it's always an easy ride. Cash4Phones filed for insolvency earlier this year, leaving hundreds of consumers out of pocket and without the phones they submitted. There is no governing body for the industry and the advice in this case was simply to contact the insolvency company Capital Books. But Ashley Turner says that most rogue companies have been eliminated through word of mouth and confidence among customers is now very high.

So, how are prices determined? James Taylor, Game's brand-engagement manager, says that prices are set according to "forecasted forward demand in the market". It sounds like marketing speak but it simply means recyclers will look at the prices wholesalers are likely to pay at some point in the future, as well as the sums offered by competitors, taking into account supply and demand.

And yet profit is not always the sole motivator. The mobile-phone companies O2, EE, Vodafone and 3 buy handsets from customers as "an enabler", a way to encourage them to purchase a new phone, according to Richard Mavers. "Customers are finding it harder and harder to afford expensive mobile devices," he says. "Recycling offsets the price of that device and it works as a strong sales tool for those guys."

The market for used phones has become so successful that companies have been branching out, buying games consoles, satnavs, tablets, MP3 players, laptops and digital cameras. There are companies which buy music, DVDs and games, too. But while some sectors – notably the video game industry – have been known to kick up a stink, claiming the pre-owned market dents profits, recyclers are adamant that dealing in used goods causes no harm. "Through our trade-in proposition, we are able to stock a wider variety of games and consoles which are no longer made," says Taylor, conjuring images of the rag-and-bone men of old.

Certainly for customers, it appears to work well. "Companies such as Apple are geniuses for making us want the latest phone but it also means you're sitting on a cash cow with a mobile phone," says Anker. "Don't let it gather dust unless you want it as a back-up or to give as a present. It really is easy money."

What to look for in a used phone

If you are looking to buy a recycled phone online or through high-street retailers, Guy Anker, the managing editor of MoneySavingExpert.com, has some pointers.

"Treat it like you are buying a second-hand car," he says. "Check it out cosmetically first. Look for scratches, especially on the screen, because something small can turn into something larger very quickly.

"Then, make sure it functions well. The danger is that something is wrong with a handset that will only become apparent later. If you buy from a reputable store then the danger is limited: CeX has systems and checks in place to make sure that the phones are working – but that's not to say it can't make a mistake.

"Spend time with the phone and when you buy it, keep the receipt. You still have rights when buying second-hand goods and you will be able to claim a refund."