06 Mar Jewellers Vs Pawnbrokers
I was asked the other day, why pawnbrokers only lend or buy jewellery at a percentage of the valuation.
So I would like to explain and it saddens me, not a month goes by without me breaking someone else’s heart
Usually it starts very positively.
The person has a valuable piece of jewellery that they would consider selling or using for a loan they are excited to find out how much it will raise. They even have a recent insurance valuation stating it is worth a very handsome amount…..and then I am left to give them the reality check.
Insurance valuations are given so that if a piece is stolen then a jeweller could create a bespoke identical item to replace it. I understand that. On the other hand, Pawnbrokers have to base any lending or purchasing decision on a realisable auction/sales value (what someone would pay for it right now) – and you would be surprised at the gulf between these at times.
I have seen an insurance valuation of $20,000 for a ring that might raise $2,000 at auction. This kind of news can be heart-breaking – not something I enjoy doing. A 3 or 4 times multiplier would seem sensible to me – and I have seen that too, but all too often it is wildly overestimated.
What other industry would get away with selling a customer a product and at the same time issuing a certificate to say it is worth 40% more than they have just bought it for, even though nobody would pay that for it?!?
You see when you buy that new Diamond ring from the jeweller you’re paying for the flash shop front, the sales staff, and all the other expenses, and that money has to come from somewhere.
But’ when you see that nice Diamond ring in the Pawnbroker’s for $3,000 with a valuation of $10,000 you are actually paying near its true intrinsic value.
Moral of the story! If you’re looking for that Diamond Ring or a fine piece of jewellery try a Pawnbroker first, you could save thousands!