You should buy a second hand Rolex.

Give me a hot second to explain myself. Let’s say you have $15,000 dollars just laying around. You don’t want to invest it in the market because you want to hold on to some liquidity in case of an emergency. You might put it in a savings account. That’s what most people would do, and that’s not a terrible idea. You’ll typically earn a yield of about .006 to 1.50 APR. You’re not even outrunning inflation, even with today’s crazy low inflation rate, but at least it’s low risk.

But I prefer to have my money work a little harder for me, even if I’m just saving it for a rainy day. And with a second hand Rolex, I can keep my money secure and have it work for me because it retains its value, it’s liquid (meaning I can sell it very easily) and meanwhile, it’s fun to own, so my money is not just working for me in a bank account, it’s doing double duty as an accessory that I love wearing. And it has a certain amount of built-in protection from inflation because as the market for new Rolexes rises, the market for second hand ones follows.

That’s the beauty of this investment.

Why Second Hand?

Rolexes, and other high end watches sell at a markup new. Meaning, you buy them from an authorized dealer (and you must do this in order to ensure the watch’s pedigree and authenticity, and ensure it’s eligibility for service from the manufacturer. The retailer has overhead, wants to make a profit margin, and is even restricted by Rolex in terms of any discounts she can offer you. So a new Rolex has a certain amount of depreciation built directly into it, say 10-30% depending on the model and how in-demand it is.

But here’s the thing, unlike cars, handbags or other luxury goods you buy, Rolexes (and some other high end watches) will normally not depreciate below the dealer’s overhead and profit margin, so once that new Rolex loses its initial depreciation, that’s it. That’s all it’s going to lose. As long as that watch is in good condition and serviced at regular intervals, it will retain the remainder of its value in the medium term, and may even go up in value as time goes by. But it will rarely lose value.

That’s why buying a second hand Rolex in good condition from a reputable dealer makes so much sense. The initial buyer has already eaten the depreciation. That’s gone. Now you only have the value, and that value remains. Take, for example, a Rolex GMT Master II BLNR (“the Batman”). The MSRP for this watch is around $11,000 U.S. Often, you’ll pay several thousand more for it new from an authorized dealer because it’s a very popular watch that is in demand. But if you can find a well maintained one from a reputable second hand retailer, you’ll be paying around $9,000 U.S. That’s a savings of at least $2,000 in depreciation costs, but, best of all (as long as you take reasonably good care of it) the watch will never fall in price, no matter how old it is or how many times it is resold. And, you have a hedge against inflation because unlike money, a Rolex is a product with a utility value that will rise and fall in the market relative to the value of the currency.

How to Choose a Second Hand Dealer

This is the most important decision you’ll make, because this will ensure that you get the investment you’ve anticipated. The number one rule to follow is don’t buy the watch, buy the seller. Has she been in business a long time? Does she have many independent customer testimonials? Is she listed by the Better Business Bureau? How do they rate her? Look in the watch forums (yes, these actually exist). What do the watch nerds say about the dealer?
Virtually all of this information is available on the internet, so you with just a little homework, you’ll find a dealer that you feel comfortable buying. And if you are comfortable with the dealer, you can be confident that the watch that you are buying is authentic, well maintained, and worth the price you are paying for it.

Other Things to Consider

Second hand Rolexes will vary in price for a number of reasons including their overall condition. Generally, a gently used watch that is in relatively more pristine condition will sell for more, while a watch that has had some scratches and seen some wear will sell for less (though this equation changes in the vintage market, where scratches are a sign of authenticity and of the watch’s story). Also, if the watch has its original box, papers and warranty card, that could raise its price by several hundred dollars, even if the warranty has expired. You can decide whether you want to save a little money without buying a watch with box and papers, or if you want to spend a little more and buy it in original packaging with all paperwork. It’s up to you. The main thing is the quality of the seller, because that’s how you know that the watch is authentic, in good condition, and it also assure’s you that you’ll always be able to get it serviced, because the seller will provide that.

The Market

As I said in the introduction, a Rolex watch is a relatively liquid item. Sure, it’s not as liquid as cash, and you can’t trade it in two clicks of a mouse like a security. But there are marketplaces on the internet that routinely buy, sell and set prices for high end second hand timepieces, and the prices will remain relatively consistent. See, for example The Watch Box and Bob’s Watches. These businesses esssentially operate marketplaces on which high-end second hand watches trade at consistent prices, and essentially rise and fall like a stock. Rolex prices are usually very stable in these markets. If you ever want to sell your watch, companies like these will normally buy it at a price close to what you bought it for.

Make Sure You Insure

The last thing to bear in mind is that when you invest in a second hand Rolex, you actually own an object. It’s like literally having money on your wrist, so it’s more vulnerable to loss or damage than other investments you might make. Therefore, you should always insure your watch. You can normally add a luxury goods rider to your homeowner’s or renter’s insurance policy that will cover it.

So tell me in the comments below, are you ready to take my advice and buy a second hand Rolex? Would you do it if you had the funds on hand? What other unusual investment vehicles would you consider?

 

 

 

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