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When to Buy & when to Sell

Are you a collector?

Is there a best time to buy, and opposingly, to sell?

At any given moment there are collectors ready to add to their stock and others ready to downsize theirs.
There are many reasons why people have to enter trading, some financial, others just because, in our current economic climate, should you be buying or selling?

In reality there is not a set rule, there are similarities with stocks & share dealings, however let us look at a few analogies; firstly the property game, professional property developers are running a business, they cannot easily stop working because the market is depressed, their working mantra is simple, buy as low as possible, improve and sell on as quickly as you can, so there will always be someone selling and someone buying. Collectable guitars are different in that buyers do not want you to improve or upgrade that classic piece of musical history. Many instruments from the 60's were transformed and modified during the 70's, new paint jobs, additional routing to convert single coils to humbuckers, even if professionally done this will detract somewhat from the purist view of an all original instrument. Any decent guitar from the 50's would have seen a lot of years in service before it was retired, this may have given rise to occasional re-frets, replacement tuners or control knobs, all acceptable if carried out with genuine parts and correctly fitted, but in contrast having a 1958 body with 1986 neck and 1998 pickups detracts from what is the age of the piece?

When is a good time to sell? There is no simple cut and dry answer to this other than to say it is solely dependant on your personal circumstances, certainly if you are awash with spare cash then buying during a recession period will benefit you, however the most basic rule which applies is what we refer to as the long game, if you think to buy today and sell tomorrow you are unlikely to see any benefit, this can only be achieved by grabbing a bargain, which inevitably means someone didn't realise what they had in their attic and you have capitalised on their error, in many peoples eyes, ours especially, not a good thing to do.

A simple way to look at this is to take a phantom piece and stick a value on it. If you were to start a collection today and wished to buy new stock which will appreciate, it will be many years before you will realise a profit. Buying new today you have to know what is going to increase over the time, this may be a limited edition run of a very sought after make, this type of instrument is what we shall use for our example. One thing to remember about buying new stock is that the manufacturer will set the retail price, in an advisory sense to the dealer, the then said dealer will decide is pitched price to attract buyers from other stores, for our instrument these are built in the finest tradition from a custom production unit. For our purposes this piece is sold at £1000 with no dealers needing to discount because there are a limited number available each month. We are UK based for tax purposes.
So you spend £1000 on a Saturday afternoon, now just like buying a new car, as soon as it leaves the showroom, the value has dropped, let's see what happens on Monday when you go back to the dealer and say you wish to sell it back, (we must ignore the fact that most reputable dealers will give you a credit or exchange, perhaps even a full refund). The dealer may explain to you that the guitar cost you £1000 but of that £167 was government tax (VAT), now he explains that as you have taken the unit home and possibly used it, it cannot be sold as new but as secondhand, will his buyers take the secondhand one or a brand new one? I think we know the answer, therefore in order to sell this one it will have to be reduced from the original list price, also consider the dealer is unlikely to pay you more for a secondhand guitar than it costs him, trade, for a new one from the manufacturer. I cannot discuss trade pricing and dealer discount structures, these vary from manufacturers, also without a margin these dealerships just wouldn't be there for you to peruse and spend your weekends, they have a lot of costs involved as well as tying up their cash in stock.
So an attractive price to sell a £1000 (new) guitar, which is now used, well think of what you would expect, 15 - 20% less, in order for you to consider secondhand against new, so we will market the guitar at say £840 retail, dealer is still going to have to pay VAT to the revenue on that so he will only receive £700, now in fairness to him he will need a gross margin which will at least equal that of selling the same instrument from his new stock, and if for our example that margin was 30% you are looking at an offer of £490 for your £1000 spent only two days earlier.
Painful isn't it? Of course selling privately you will command a higher figure, the tax element becomes less relevant, you do have the hassle of advertising, dealing with time wasters etc., but then you get paid more if you work harder. On line auctions are the most popular method of selling privately, certainly some risk involved, fees are generally low but do ensure you do your research, many people list for weeks again and again without a single bid, it is not because your buyer hasn't found it, it is because the price is set too high, remember the dealer makes a margin and earns his share, when you sell privately you, the seller, expect to get more, but by contrast, your buyer, is not expecting to pay dealer pricing either, he would rather spend an hour in a showroom trying out his potential purchase, feel confident the seller will still be there on Monday, they will offer guarantees of quality, genuine article etc., and of course will offer guidance and usually a huge choice, so if our buyer is going to purchase from you via he internet auctions he will be hoping for a bargain, (against dealer pricing) therefore if he could buy for £840 from a reputable dealer, he will need at least 20% saving if buying from you direct, a price closer to £670, So in our example you can see you have taken a whopping one third off what you paid. Auctions are best if you have something which is rare, no real set value and you have a lot of interest generated, these type of auctions, such as held by Christies in London and New York will command a good price for such vintage and rare pieces, however the selling fees are extremely high.

You could consider commission selling, this is where a dealer will offer to display your goods in their showroom and a dealer price and just take a commission on the sale, this has tax advantages as the proceeds of the sale price go to you and the dealer charges you a commission previously agreed, so if that was 25% then he will invoice you for the percentage amount and VAT on that amount only, not the full selling price. Another way is to offer via our match service, we contact registered members we know are currently buying and offer them your stock you wish to sell, we then put you in contact with each other to thrash out a deal, we would expect a finders fee or sales commission, which is far less than a professional auction house. On occasion, certain premium members have this service free, others choose to involve us in all aspects of the purchase in order to retain their anonymity, either way, it costs nothing to ask. Use the contact form or email commissions@guitarsforstars.com

Therefore the best time to sell is when you have to, if you have kept the stock long enough, and production has been ceased for some time, fewer examples are about, less competition, more desirability, etc.
Best time to buy? When the market is depressed and you can afford to commit the funds for the long term.

Talking with a premium member the other day and he was telling me his first acquisition was in the early 70's, fender 3 bolt strat, been hardly out of a case since, all original, any plans for it i said, he replied, I am expecting to leave it to my children he said, that is the sort of commitment we are talking about.

For info on buying or selling via our services, please contact icommissions@guitarsforstars.com



1970 Hendrix Strat

Above - 1970 Hendrix Strat - seriously collectable

1983 Gold on Gold

1983 -30th Anniversary - Gold on Gold Strat - Thousands produced

1959 Coppercaster

1959 - Coppercaster limited edition - 30 only ever made

es339 pelham blue

2009/10 - Gibson ES 339 Pelham Blue -100 only

PRS Private Stock - can only ever be one!


Here are the maths again for clarity;

£1000 purchase new from dealer
Real cost is £833 + VAT (£167)
2nd hand dealer selling price is now £840 (inc tax)
Real cost is £700 + VAT (£140)
Profit margin required is about 30%, so offer is
£490 - a 51% reduction in your original list price
The happiest person is the UK taxman


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