Diamonds are often expensive when purchased from a retailer, but they lose much value as soon as they leave the jeweler. You may wonder how much diamonds depreciate after purchase and why they depreciate.
Most diamonds depreciate by 20–60% immediately after purchase. Unfortunately, most people cannot sell their diamonds for as much as they bought them for, so diamonds are generally unsuitable investments.
Want to learn more about a diamond’s resale value and why it depreciates so fast? Keep reading to learn the most important details!
Diamonds’ Resale Value Explained
As mentioned above, diamonds usually lose between 20 and 60% of their retail value as soon as you make the purchase. While this may seem steep, it is the case with many items we purchase.
Pretty much anything you buy will lose value right away, so it’s no surprise that a diamond also depreciates. You should never expect to receive much money for a diamond, even if it’s in brand-new condition and never worn.
Reasons Diamonds Depreciate After Purchase
There are a few reasons diamonds are likely to depreciate right after purchase. In this section, I’ll discuss these reasons in great detail.
Diamond Prices Are Marked Up
One of the first things you should be aware of in the diamond industry is that the prices are always marked up. When a retailer purchases a diamond from a wholesaler, they must mark up the price to earn a significant profit so that their business is worth their time and effort.
Retailers can get away with marking up the prices because they are the only ones who can buy the rings from the wholesalers, so they can essentially do what they want.
It’s also a normal part of business and how companies can profit from selling goods. So, when you go to a jeweler and purchase a diamond, be aware that the price they give you is more than what the ring is actually worth.
If someone were to buy that ring and sell it tomorrow second-hand, the purchaser would get it for a significantly lower price due to the initial markup.
In addition to the diamond retailer marking up the prices, the manufacturers and wholesalers (i.e., the places the retailer gets the products from) also markup their prices. Therefore, it’s a constant cycle of different parties marking up prices, causing the initial selling price to be more than the resale price.
People Don’t Like To Spend As Much Money on Used Diamonds
It’s normal for people to prefer buying something “new” that hasn’t had any previous owners. Since people have this desire, diamond retailers can jack prices higher because they know people will be willing to pay them.
Even if a used diamond is in perfect condition, the fact that it already had a previous owner removes its uniqueness, meaning most people won’t want to pay a high price.
For example, if you were to buy a loved one a used diamond, they might be offended that you didn’t buy them a new one. Buying someone a diamond already worn or used by someone else can be seen as impersonal or cheap, even if there is nothing wrong with the product.
These feelings and opinions are ingrained in our minds, so it’s no surprise that diamonds depreciate as soon as they leave the store. Spending much money on a diamond that isn’t fresh off the shelf is considered a waste.
The Diamond Industry Is Tightly Controlled
Most people purchase diamonds and deal with the fact that the value depreciates immediately. However, it’s essential to understand how the industry works to learn more about why diamonds quickly depreciate in value.
One of the biggest problems with the diamond industry is that it’s tightly controlled by a small number of entities.
According to the Curious Economist, diamonds were discovered in large amounts across Africa many years ago. Since there was such an ample supply, the prices were lower than they are now. There was little value associated with diamonds at the time due to how easy they were to produce. Plus, there was an abundance of them.
Eventually, a company known as De Beers took over the industry, purchasing a large chunk of diamond mining facilities. Since De Beers owned most of the world’s diamonds, it could control the supply and pricing. The company reduced the supply to ensure demand and prices remained high, and the tactic worked exceptionally well.
To this day, De Beers has a clear monopoly in the diamond industry, and it’s one of the main reasons diamonds lose much of their value right after purchase. Although De Beers makes it seem like diamonds are scarce and hard to come by (by controlling the supply), they are actually the opposite of rare, which is why people aren’t very willing to spend much money on them once they’re used!
The Saying, “A Diamond Is Forever”
You’ve probably heard the term “a diamond is forever,” but have you ever stopped to think of the consequences this saying has on the value of used diamonds?
One might think that such a strong statement indicates people are willing to spend a lot of money on used diamonds, but it’s quite the opposite. This saying suggests that a diamond is a sign of eternal love, so most people won’t want a second-hand diamond if they receive it from a loved one.
If you give someone a diamond as a display of love and affection, they mightn’t be impressed to learn it has previously been worn by a random stranger. You may not even realize it, but the saying, “a diamond is forever,” is one of the big reasons these feelings are ingrained in our minds.
We are led to believe that only a brand new diamond is a valuable gift because, after all, diamonds are forever, according to the slogan created for a De Beers marketing campaign.
Can Diamonds Appreciate After Purchase?
Diamonds can appreciate after purchase, but only in rare circumstances. You should only purchase a diamond with the hope of selling it for the same or a higher price in the future if it’s an exceptional piece. In most cases, you’ll lose money.
When Is a Diamond Likely To Appreciate in Value?
Below are the two occasions where a diamond is most likely to appreciate value. Remember that these occasions occur rarely, and most diamonds do not appreciate value.
If It’s a Rare Diamond
If you’re lucky enough to purchase a rare diamond (such as a red one), you might be able to sell it at a higher price. When something is rare, people are more willing to spend a lot of money on it, and things like red diamonds are scarce.
Red diamonds aren’t the only rare types–there are also blue and pink diamonds, to name a few. These types are also more likely to appreciate in value than a standard diamond because they have a much lower supply.
One of the largest red diamonds in the world is currently owned by a jeweler named Moussaieff. If they were to sell the diamond today, the jeweler would make millions!
If the Diamond Has a Rich History
A ring that’s been around for decades or owned by a well-known figure is more likely to appreciate in value. People like the idea of owning something that someone rich and famous once owned and possibly wore because it makes them feel connected to that person. It also gives them a sense of importance to own a diamond that has a rich history.
Since most diamonds available to buy don’t have rich histories, they’re unlikely to retain or grow in value.
How To Get the Most Money for Your Diamond
If you have a diamond and are interested in selling it for as much money as possible, there are a few tips to be aware of. Below are the main ways to ensure you get the highest price possible.
Ensure It’s in Excellent Condition
No one wants to spend a lot of money on a diamond that isn’t correctly taken care of. Luckily, diamonds are relatively low maintenance and easy to keep clean, so keeping yours in near-perfect condition shouldn’t be challenging.
In addition to diamonds being easy to keep clean, they are also highly difficult to damage or break due to the strength of the materials. Still, you should always be careful when handling it so as not to cause any damage.
Before selling a diamond ring, examine it closely to ensure everything is in order. If you notice dirt anywhere, clean it thoroughly until it’s gleaming.
The best way to clean a diamond is to soak it in warm water and dish soap. For stubborn pieces of dirt, use a toothbrush after soaking.
A clean and well-maintained diamond will sell for a higher price than a dirty or damaged diamond, so it’s worth your while to keep it in good condition.
Keep It in the Original Box
When buying a diamond, it’s always good to keep the original box and packaging in case you ever need to sell it. It’s also wise to keep the box, as it’s a perfect and safe place to store your diamond.
Additionally, a diamond looks more attractive to a buyer if sold in the original box because it makes them feel like they’re getting a “new” product, even if they know they aren’t. While the original box is essential to keep, the original documentation is an added bonus.
Not all diamonds come with documentation and certificates, but if yours does, keep it safe. The documentation gives information on the diamond, including its clarity and carat weight. This documentation proves to potential buyers that it is authentic, ensuring they will get the real deal if they make the purchase.
When trying to sell a ring for the best possible price, make sure to disclose that the diamond comes with certified documentation so that buyers are fully aware of it.
Set a High Price From the Beginning
To get the best price possible when selling a diamond, you must set a high price from the beginning, as long as it’s realistic. It’s also essential that you are confident about the price you set and that you can explain to people why you’ve chosen the price.
The worst thing that can happen is someone offers you a lower price, in which case you have the power to accept or deny the offer.
Avoid underestimating the money you could get for the diamond while remaining realistic and not getting your hopes up too much. You likely won’t be able to sell the diamond for the original price, but you can still get a good amount of money if you set a high price and remain confident about your choice!
Don’t Accept the First Offer (Unless it’s Really Good)
When selling a diamond, it can be tempting to accept the first offer. However, it’s not always a good idea to do this because there’s a chance you could get a better deal from someone else.
Of course, there are exceptions to this. For example, take advantage of the opportunity if someone offers you a lot of money that you know you won’t get from anyone else.
It’s also a good idea to accept the first offer if you’ve been struggling to sell the diamond for a long time and have finally received your first offer.
Other than those circumstances, avoid accepting an offer immediately, as it’s good to know what else is out there.
Conclusion
Unfortunately, diamonds depreciate between 20 and 60% as soon as you buy them. Therefore, purchasing a diamond as an investment opportunity is rarely a bright idea. As soon as diamonds are purchased, most people see them as less desirable.
Diamonds lose value immediately because the prices are marked up by the retailers. Additionally, De Beers has a large monopoly in the diamond industry, making diamonds sell for high retail prices.
A diamond will only appreciate in value if it’s rare or has a rich history.
