According to The Wall Street Journal, second-hand iPhones usually go from the US to overseas.
Owners of older models prefer to use their devices to offset the cost for the latest version.
“We are supply constrained. There is insatiable demand for this product,” said Israel Ganot, chief executive of buyback service Gazelle Inc.
The publication writes that older iPhones can be sold for more than their initial purchase price.
This happens because US carriers tie the price of the iPhone to annual contracts and users eventually pay a higher cost than they actually realize.
Thereby, a 16G iPhone 4S can be priced at $240 on Gazelle, which is $40 higher than what most US users paid for the device.
The report also notes that the iPhone 4 can sell for $145.
As for broken iPhones, they are used for parts or repaired overseas.
WSJ notes that AT&T iPhones can be more valuable on this second-hand market as they can be available on more networks overseas.
The iPhone 5 release sparked an increase in the reseller market.
Gazelle reportedly gave out over 500,000 quotes on the day the iPhone 5 was launched, and over 2.5 million in September, which is five times as much as last year when the iPhone 4S was introduced.