If you like your watch, you can keep your watch. With a bit of luck and an eventual COVID-19 vaccine, you’ll never have to sell it. When you die, someone else will take the hit. So depreciation – actually selling a watch for less than what you paid for it – isn’t a factor. Unless . . .
you don’t like your watch. You want to sell it. Or have to sell it to invest in rent, groceries, car payments, shoes for the kids, whatever. That’s when you’ll get whacked.
It’s entirely possible you’ll get less than half your watch’s original purchase price. In these hard economic times, you could be looking an even worse outcome. Avoid losing money – or at least as much money – by following these three basic rules . . .
Buy the right watch
If you masked-up and walked into a Patek Philippe dealership, slapped down a banker’s draft for $30,620 and walked out with a steel, blue dial Nautilus Ref. 5711/1A, you could put it on chrono24.com and sell it that day for $65k. I make that zero percent depreciation.
Yes well, the odds of Patek selling you a 5711/1A are somewhere between slim and none, and Slim just left town. Same chances that a Rolex dealer will sell you a zero depreciation steel Daytona. Or that an Audemars Piguet dealer will take your money for a Royal Oak. Or that a Vacheron Constantin dealer will run your credit card for a blue dial Overseas. So . . .
To minimize watch depreciation, start by accepting the fact that 90-something percent of all watches only hold a fraction of their value. Some watches depreciate less than others. That’s about as good as it gets.
It’s all about gauging supply and demand. Here’s the “secret” truth about the demand side of the equation . . .
Most people buy boring watches from recognizable brands. You may consider a $21k Jaeger-leCoultre Master Calendar a sublime horological concoction, but to the average watch buyer it’s Jaeger-leWhat? Even the “famous” Jaeger Reverso is only known to people who know it.
Unless you have the insight needed to choose obscure [to the gen pop] watches whose supply is close to demand, one word: Rolex. The world’s most recognizable watch brand. For most people, the only recognizable watch brand.
If you can buy an coveted Rolex – a Hulk, Pepsi, Kermit or whatever – and not pay over-the-odds for it, good for you! Meanwhile, you’ll always be able to sell a bog standard Rolex for good money. Maybe not great money. But good money. And quickly – depending on how much of a hit you’re willing to take.
When it comes to avoiding depreciation as much as completely, easily and safely as possible, other than Rolex . . . there’s nothing other than Rolex. If you have to “invest” in some other watch brand, go OMEGA. Nothing weird (they launch close to 200 models per year). A Seamaster ($4k new as above) or a Speedmaster.
High horology – watches above, say, $50k – aren’t exempt from the law of supply and demand. With certain notable exceptions, the higher up you go, the further resale falls. Until you get to the very top? Put it this way: while certain Ferraris appreciate, most depreciate like a stone thrown in a deep dark well. Just so you know.
Buy A Gray Market Watch
Gray market watches are new-in-box watches that the dealer couldn’t sell. That’s a red flag.
If a dealer couldn’t sell the watch, demand didn’t meet supply. As long as someone will buy it, it isn’t worthless. But it’s worth less than a watch that continues to command the manufacturer’s suggested retail price or thereabouts.
[Note: most gray market watches are discontinued models. They’re a bargain, but they’re always subject to radical and ongoing depreciation. Their value may not have bottomed-out. They may even be impossible to sell.]
A gray market watch doesn’t come with a factory warranty. The re-seller’s warranty may seem just as good as the manufacturer’s, but it isn’t – a manufacturer’s warranty provides a higher level of efficiency, quality and accountability. In any case, the market doesn’t value resellers’ warranties. Which lowers a gray market watch’s value.
The advantages of buying a gray market watch: when you flip it, it’s a one-owner sale (you can maintain the watch’s quality by not damaging it) and you have the box and papers. B&P add value to any watch, helping to maintain its value.
Buy a Used Watch
Sorry, “pre-owned.” Pre-loved? No matter what you call it, a used watch is the best way to avoid the biggest depreciation pitfall: the initial hit.
New watches are sold at a huge mark-up. Luxury watch dealers take a 40 percent profit. If you’re buying a new timepiece, it’s best to buy from an authorized dealer and negotiate a discount – remembering that every dollar you don’t pay protects you from depreciation.
Anyway, a used watch eliminates a chunk of the markup paying the AD’s rent, salary and kids’ education. Buyers are willing to pay a premium for a new watch at a dealer (sure I’d love a coffee). Buyers expect a discount for a used timepiece. Which is why most used watches are significantly less expensive than new watches, even when they’re more-or-less box-fresh.
If someone’s already worn a watch, the price you pay for it will be less. The difference between what you paid for your used watch and what someone else will pay for the same used watch is likely to be relatively small, compared to the difference between new and used.
Unless the watch is on a dramatic demand downslope. If the market doesn’t like a watch, it’s only a matter of time before it’s a question of how low can you go?
To avoid major depreciation, stay away from obscure watches. No matter how much you love that “overlooked” gem, the less well known it is, the smaller the potential market, the greater the depreciation. Did I mention how well a used Rolex retains its value?
New, Used or Gray Market?
Whether a new, used or gray market watch yields the least depreciation depends on two factors: price and future desirability.
The only way you can judge a new-to-the-market watch’s potential depreciation: compare it to similar models from the past and use your gut instinct about where the market is going. That’s a skill developed over years. If you have it, good for you, and good luck with that.
For watches that have been around a while, compare the retail, gray market and pre-owned prices (pay close attention to older examples). If there’s a large gap between new, gray and/or pre-owned, that’s bad. If the watch maintains most of its value over time, that’s good.
Buy new if there’s a small difference between the price of an identical new and used model. (The factory warranty is worth cash money.) Buy gray market if there’s a large gap between the price of a new and gray watch – and the watch is still in play. Buy used – from a trusted seller – if you want to keep depreciation at bay.
Most people don’t make this calculation. Why should they? Most people don’t buy a watch with the idea of selling it. They never have to face the stark reality of how much money they’re going to lose between transactions.
But if you’re a person who swaps out watches on a regular basis or have limited financial means (and great expectations), factor in depreciation. Bottom line: managing depreciation puts more money in your pocket for your next purchase.
You never know what will end up being collectible. Sometimes it’s the least likely things because no one purchased them, that end up with major value in the long run or what was common that so many people used, but the mint ones end up having a ton of value because things were beat up in the past. It’s a guessing game on what’s “collectible.”
Almost all new luxury watches are “used” anyway as countless tire kickers have walked into a dealer and tried on or handled the watch.
Not if they have all their condoms and tags
[…] a traditional timekeeper from one of the many underrated luxury watch brands, you will suffer worse depreciation than if you buy a watch from one of the universally recognized top tier luxury watch brands. But […]