4 Smart Ways to Unlock Cash From Your Luxury Watch Collection

A luxury watch collection stored in a safe is not making you any money. Although the watches are an asset, the only way they are beneficial to you is so long as you know how to utilise the value they possess, and often selling may not be the most optimal strategy. There are a number of alternatives for those looking to get some cash flow without selling the watch.

Your Watch is Worth What You Can Sell it for, not What You Bought it for

The box price is not relevant the moment you are selling it; rather the relevant information is the pre-owned market price. That is, what someone is willing to pay for the watch in terms of its reference, condition, and so forth at the current time. The replacement value (what your insurance will get you) and the resale value (what someone will pay you in cash) are two separate figures, and conflating the two often leads to disillusionment.

Grey market dealers are even more difficult as they often operate at a much broader scale, with the market value varying significantly from one region to another, and it is not always a clean transaction.

A better reference is recent auction results and dealer sales, rather than asking around on the classifieds.

The category has grown to such an extent that “Swiss watch exports hit a record 26.7 billion francs in 2023”, according to the Federation of the Swiss Watch Industry. The value of a watch is therefore no longer an esoteric consideration; it has entered the realm of serious assets and should be treated as such.

Four Ways to Make a Watch into Cash

Selling the watch to a dealer is the easiest and quickest way to convert it into cash; a dealer will buy it at a discount as they have to sell it on for a profit, and they can afford to buy it at a lower price. The dealer will also have a bigger discount if the watch is in dire need of servicing or lacks papers.

Selling it at auction is a good way to get a higher price for something rare or prestigious, but it is a much longer process, and one that comes with high costs and low margins for the seller, as the house will take a cut and there is no guarantee that the watch will sell at the desired price.

Pawn loans are the traditional way of getting cash against a watch; hand over the watch, get a loan up to a certain amount, and pay it back with interest, with the watch being repossessed if you fail to repay. The issue with pawn loans is that pawnshops do not specialise in watches; they are generalists, and they do not have a great appreciation of the value of the collateral, and they tend to lend conservatively as they have little faith in their valuation.

Collateralised loans are another alternative for those looking to get a loan against their watches because they can involve a more specialised valuation. Instead of dealing with a general pawnshop, specialised lenders and collectors (such as Big Watch Buyers) deal in watches, and instead of getting a loan against an unknown value, they can leverage their knowledge of the market for specific references. The terms can take into account the expected liquidation value (the amount they would get for the watch if they sold it on the secondary market) and the risk they take on in giving the loan (the level of risk may influence the terms).

What a collateral loan protects?

Selling your watch means relinquishing control and ownership of it; whoever buys it can benefit from its potential future gains. Taking out a collateral loan helps you maintain exposure to those gains, if you repay the amount owed to the lender. You can satisfy your need for cash, and the lender holds on to your watch in the meantime. Pay back the money (plus interest, if applicable) and you get your watch back.

This is more valuable than it may seem; while many mainstays of the watch collecting world will not see exponential gains (Rolex Submariners, for example, have steadily increased their value by approximately 4% per year since the late 1960s), there are references that have massively appreciated in the past few decades; selling the watch at a moment of desperation may well mean that you are missing out on substantial gains in the future.

Buy-back agreements are another tool to help you maintain exposure to the gains in the value of the watch. They are fairly common in the industry these days; many lenders offer them as an option to their borrowers, and they stipulate a price at which the lender will buy back the watch in the future, and the borrower can sell it to them at that price.

Be mindful of the maths when it comes to the loan-to-value ratio; how much the specialist watch lender is willing to lend against the value of your watch depends on two broad factors: their expected liquidation value (how much they think the watch will sell for on the secondary market) and the level of confidence they have in that estimation.

A higher degree of confidence may allow the borrower to take out a bigger loan, as the lender is less nervous about the collateral’s value. The more information you have about your watch and its value, and the more trust you can inspire in the lender, the more beneficial your collateral loan can be to you. Value should always be seen as a fluid concept.

Think about the market conditions before storing a watch with a lender; what is hot can become cold, and what is in demand can stop being in demand. Try to think about how much time you will need to utilise the watch as collateral for a loan, and if you would be in a financially viable position to do so.

A watch collection is an asset as much as it is a hobby, and should be treated as such; it can provide you with much needed cash without you having to give up the pieces you love by selling them.