Having been in the diamond industry for more than a decade, I always cringe when I hear jewelers use the phrases: “It’s an investment and you are getting a great deal” or “This diamond ring is going to hold its value because it’s an XXX cut grade or clarity/color rating”.
While most people don’t treat a diamond ring purchase the same way we buy or sell a stock, they have a misconception about diamonds having good resale value and viewing them as a form of investment.
Don’t get me wrong. Diamonds do have an intrinsic value but you will face a significant loss when selling your diamond jewelry. In fact, as soon as you make a purchase and leave the store, your diamond ring is likely worth 50% less than what you paid for 10 minutes ago. Shocking, isn’t it?
In this write up, we are going to reveal why diamond rings have poor resale value and why most people falsely believe that their jewelry is worth more. You are also going to find out how to estimate the value of your diamond ring and the best places to sell your diamond jewelry.
Let’s dive right in…
Here is a list of topics we will be covering:
For people in the trade, we have access to cutting houses and contacts of wholesalers to get an idea of current diamond prices. Even so, getting diamond pricing correct is more of an art rather than a science.
But what if you are just a regular guy on the street who’s trying to sell a diamond ring? How do you determine a fair resale value for your diamond ring? Broadly speaking, diamond prices are largely determined by the 4Cs: cut, color, clarity and carat weight.
In order to estimate the diamond resale value, you can make price comparisons of your current diamond ring against those that are being sold in the market. Bear in mind that details matter when you are making a comparison.
For example, you need to make sure you are comparing a GIA certified diamond against a GIA certified diamond of similar properties. Likewise, subtle details like fluorescence, type of inclusions present and cut precision can also affect the value of a diamond. You may want to refer to this article on diamond prices for a comprehensive read.
To get a rough idea about the resale value of your diamond, you can multiply the average retail price of a similar stone by 30%-75% to get a rough estimate. If you bought your ring from a high-end store like Cartier or Harry Winston, you can generally expect to take a bigger loss on the secondary market compared to a ring that was purchased from an online retailer with a significantly lower markup.
That’s because the retail price would include brand premiums and business overheads. And when you sell a diamond ring, most buyers don’t care about the cost of manufacturing, air-conditioning, salary, insurance or shipping expenses that go into operating a business.
A common complaint that I hear from readers who are selling their diamonds is that they do not have high resale value. In fact, they are often confused by why their diamond ring has lost a significant percentage of its value despite having an appraisal document that states otherwise.
First of all, you need to understand that the value stated in an appraisal document should always be taken with a pinch of salt as it does not reflect the intrinsic value of the diamond.
You see, unethical sellers often use an appraisal document with an inflated valuation to mislead buyers, making them believe they are getting a “good deal” when they aren’t.
Here’s an example of how an appraisal document looks like and in this particular example, the estimated retail replacement value is listed as $21,200. For some context, the retail price of a GIA certified diamond ring with F/VVS2/triple excellent cut quality would be around $15,000.
In the jewelry industry, appraisal documents usually list a value that is approximately 50-100% above the retail price of the ring. It is a fallacy to believe that you are getting a “good deal” because the salesperson claims that you are paying a lot less than what the ring is worth.
If the true value of the diamond ring is $21,200, why on earth would they sell it to you at a loss of $15,000? Think about it. Is the jeweler stupid? Who’s really benefitting from using an appraisal document with inflated valuation to market their products?
The answer is both the jewelry store and the insurance company would benefit at the consumer’s expense.
As mentioned earlier, unethical retailers use the appraisal value as a marketing tactic to sell their diamonds. An inflated appraisal document allows the insurance company to charge a higher insurance premium even though the item has a much lower replacement cost if a claim is made.
I’ve heard this from a number of people who actively prowl auction sites like eBay or Craigslist to look for deals in the hopes of making a fast buck. The mantra of “buying low, selling high” can get you into trouble unless you know exactly how the industry works and what you are doing.
It’s easy to get suckered into a seemingly great deal on a diamond ring at places like eBay because prices look cheap on the surface. However, the intrinsic value of a diamond is largely determined by the 4Cs and subtle details that a layperson may overlook.
In order to make a profit, you are basically operating on the basis that the seller is a sucker who doesn’t know what they are selling to you in order to “buy low”. On top of that, you need to find a buyer who’s willing to buy it from you at a higher price and each step of this process entails risks that you need to account for in order to turn a profit.
The short answer is no.
In the retail market, a lab diamond typically costs 50% less than a natural diamond with similar specifications. However, when it comes to resale value, lab diamonds have very little to zero resale value compared to a natural diamond.
In fact, you may notice that vendors that sell lab diamonds would not offer any trade-in or upgrade policies for lab created diamonds. However, the same vendor would have upgrade policies in place for natural diamonds.
Now, you may wonder why this is the case. Well, that’s because the supply of lab created diamonds has been growing tremendously due to improvements in technology. This has led to an ever-decreasing price trend for lab created diamonds and jewelers know this.
If they were to buy a lab created diamond on the secondary market or allow trade-ups, they would be buying at a more expensive price than they would months down the road. This would put their capital at risk and any trade-up policy would become a money-losing proposition.
The resale value of your diamond ring will not only depend on its condition/quality but also where and how you sell it.
Selling directly to another person via Craigslist or eBay would theoretically give you the best price for your diamond because you are dealing with non-trade personnel. However, this is also the method that requires the most effort to suss out reliable buyers and entails the most risk when dealing with strangers.
A more straightforward method is to approach the vendor that you bought your jewelry from. You could ask to see if they do buybacks or offer a trade-in option for your diamond ring. Based on experience, I would say that most vendors won’t offer this option and even if they do buybacks, it would be done at a fraction of the original costs.
Some jewelers also offer a consignment option where they can help you sell your diamond ring to another customer at a price that is pre-agreed by you. For example, the jeweler can place your ring in their display cases and if they manage to sell it on your behalf, they would take a 20-30% cut as their commission.
The problem with this method of selling is that the ring could be left unsold for 6 months or even a year if there is no demand. This means that if you need the money urgently, this would not be a viable method to liquidate your jewelry quickly.
You could also sell your diamond ring to a pawn store or “cash for gold” business where they are likely to take in your diamond ring immediately for cash. However, these stores usually lowball their offering prices as a compromise for the instant cash they provide.
As I explained earlier, diamond grading and pricing is very nuanced and complex. In my opinion, the easiest way for a consumer to sell their unwanted jewelry is via WP Diamonds. All you need to do is to complete a simple form with information about your jewelry to get an estimated price for your item.
It’s fast, free and there are no obligations to get a quote. The final offer will only be confirmed after you schedule a personal appointment in their offices or via their free insured shipping. Instead of wasting your time dealing with a jeweler or a stranger by yourself, WP Diamonds gives you a safe and hassle-free way to sell your jewelry.
As a consumer, diamonds do not have good resale value and you can expect to take a big loss in the event you need to sell your diamond ring. That’s because when you buy a diamond ring at retail prices, you are going to be paying a hefty margin that goes into the jeweler’s profit.
And when you want to sell the diamond, no jeweler in the right mind will be willing to buy it from the public at retail prices. Why would they do so when they can buy diamonds at lower wholesale prices from their suppliers?
This means that if you are going to sell your diamond ring, you aren’t selling it at the price you bought because no one would take the ring. Even if you go down 30-50% less from your original purchase price, you won’t find a jeweler to take it off your hands unless you go down below wholesale prices.
Understandably, most people want to get the highest possible price when selling an unwanted diamond ring. The harsh reality is that you are going to take a significant loss in the event you need to sell your diamond jewelry.
In the best-case scenario, you will only be able to recover 20%-60% of what the diamond jewelry initially cost.
So, if you are harboring the notion of buying diamonds as a form of investment or reselling them for a profit, I hope you scrap these ideas. My advice is to buy a diamond for wearing and enjoyment but don’t have the expectation of getting your money back.
With all that said, we’ve come to the end of the article. If you have further questions or need advice in selling your diamond jewelry, feel free to get in touch or leave a comment below!