A luxury timepiece is several things wrapped into one - a status symbol, fashion item, and a good store of value. As a store of value, most luxury watches tend to retain their original cost price or appreciate in value over time. By implication, owning a $10,000 luxury watch means you still have your $10,000 or more (in asset form) even if you don’t have it in liquid cash anymore.
By implication, if you ever run out of cash and you need an urgent bailout, your luxury watch can be used to raise the money you need. For this, you have two main options. You can either sell the piece right away or apply for a collateral loan with it.
Each of these options has its pros and cons. Selling is an efficient but permanent solution that makes financial sense in certain situations. On the other hand, getting a loan on watches is a short-term solution that gives you the option to retain your asset, especially if it holds sentimental value beyond its monetary cost. In this guide, we will examine both financial options, comparing them to determine which one makes better economic sense for your situation.
Reasons to Sell Your Timepiece
Selling your timepiece to meet a financial need is often a last resort for most people. However, it is a viable option that makes financial sense in certain situations. Some of the instances where pawning off your luxury watch might make better sense than getting a loan include:
To make a Profit By Taking advantage of a price hike
The luxury watch market can be quite volatile. The value of a pre-owned timepiece can increase drastically for a number of reasons. There have been instances where the price of a watch rose astronomically because it was spotted on a celebrity’s wrist or for several other seemingly insignificant reasons.
For instance, before the Patek Philippe Nautilus 5711 was discontinued, it gained over 400% of its original value between 2018 and 2022. If selling your watch allows you to take advantage of a price bubble like this before it bursts, it makes sense to sell it. You can multiply the original cost of purchasing the watch by the money required to meet your urgent needs. You may even get enough from the sale to buy a brand new watch to replace the one you sold.
You have Other Alternatives.
Selling your watch might be better than getting a collateral loan if you have a large collection of watches that never see the light of day. Instead of simply leaving the watches to gather dust in your closet, you can declutter and make some extra cash by selling off the watches entirely. This also allows you to get the funds without dealing with the paperwork of a loan application or worrying about repayment.
Low Chances of Repaying
Getting a loan is only a good idea if you have a good chance of repaying on time. Before making a financial decision like this, you should evaluate your financial situation thoroughly so you can find the most viable option for you.
Applying for a collateral loan might look like a good idea on the surface because of all its benefits, but if your financial situation makes it difficult to repay the loan, it’s best to simply sell the watch once and for all. With a loan agreement, the lending company gets the right to resell the watch if you fail to make repayment on the due date.
Get the Full Market Value of Your Watch
Most collateral loan providers will only give a percentage of your watch’s value as a loan (60-80%). This might not be sufficient to cover your expenses. For instance, getting a $7,000 loan for your $10,000 watch might not be a good idea if you need more than $7,000 to meet your needs. By choosing to sell your watch instead, you can receive the full value of your watch, especially if you manage to find a good buyer for the piece.
Reasons to Get a Loan
Using your luxury timepiece as collateral for a loan instead of selling it off outright offers several benefits. You can get quick access to the funds you need while still holding on to your prized assets. There are several instances where this arrangement makes way more sense than simply selling your watch. Some of the reasons why you should consider getting a collateral loan include:
You Need a Small Loan.
A loan for watch arrangement allows you to access quick credit based on the appraised value of your timepiece. It’s the perfect financial instrument, especially if the amount of money you need is within 60% to 80% of the value of your watch or even lower (which is typically what you’ll get when you apply for a watch collateral loan).
This makes more sense than selling the watch for a lot more money than you actually need. You can get just enough to settle your immediate financial needs at a relatively affordable interest rate.
Get Funds While Keeping Your Prized Asset
The most important reason people opt for an asset-backed loan instead of selling the asset is that they get to keep their prized asset while meeting their financial obligations. Selling your watch means you’ll lose the timepiece forever.
Some timepieces hold sentimental value beyond their actual monetary cost. For instance, the first-ever watch you purchased as a collector or a gift given to you for a special occasion has significant sentimental value. Even if you eventually have enough money to afford the timepiece in the future after selling it now, it’s unlikely that you’ll ever get the same watch back again.
If this is a watch with emotional value, you might want to hold on to it instead of pawning it off. With a collateral loan, the lender keeps the watch in a secure vault until the loan is repaid. You will get your watch back in perfect condition, which is a more desirable outcome in many cases.
Get Funds Faster
Selling your watch is often a long and complicated process. It’s hard to find buyers who will pay the true market value of your timepiece. This is particularly true for watches that aren’t hot in demand right now. It might take weeks or even months to find a suitable buyer for your watch.
Thanks to lenders offering collateral-based loans on watches, watch owners can access quick funds within a few days. Collateral-backed loans require no credit checks or any other complex requirements. This makes them more accessible compared to other loans. How much you’ll get depends on the value of your asset, instead of your credit score or any other complex requirement.
With a provider like AMETA Finance Group, your loan will be disbursed to your account via wire transfer within 24 to 48 hours of signing the loan contract. This process is smoother and more accessible compared to the alternative option of selling your timepiece. Pawning your loan also comes with the risk of selling it below the true market value out of desperation to meet your needs.
Beat Market Fluctuations
The value of luxury watches fluctuates over time. This means there’s a risk of selling your watch too early before prices peak. Fortunately, the risk of this happening is lower if you choose to use it as loan collateral.
With the loan option, your watch remains yours and will be returned to you after the loan is repaid. This means you can still sell it at a later date (if you want) when the market value is even higher than its current level. You get the money you need to meet your urgent needs right away and still beat market fluctuations.
Conclusion
A luxury watch is a great store of value that can help you get out of a financial tight spot by either selling or getting a loan. Which of these options is the best for you? It all depends on your unique financial situation and emotional attachment to the watch. While selling the watch right away is a viable option, a practical (and typically preferred) alternative is to use it as collateral for a loan. You should choose a loan if you need short-term cash, have a strong attachment to your watch, or believe that the watch will increase in value in the near future. As long as you’re confident you can repay the loan with interest within the agreed period, getting a loan is generally a better option than selling your watch.