Why do Pawn Shops Pay a lot for Diamond Rings?

February 03, 2020 - Jewelry & Luxury Items

During the 1960’s the demand for diamonds increased tenfold in America.

Everyone across the country wanted to get a diamond ring for commemoration! The pawn industry helped fill the market demands for ‘used’ diamonds by helping to circulate the amount of jewelry that was available. Many PawnGuru users have been pleasantly surprised to find out how much cash they can get for selling their diamond rings at a pawnshop. Offers can range from $65 to $1,500. Sometimes more depending on the quality of the diamond!

The best way to get an accurate price point is to list your diamond ring on PawnGuru for free!

5 Reasons Pawnshop Pay High Prices for Diamonds

1. Pawn Dealers Work Alongside Diamond Dealers

As the demand for diamonds spiked, pawnshops looked for ways to cash in on the diamond market. This meant a shift in the pawn industry as many pawnshops gained certification from the Gemological Institute of America, bought the necessary equipment for diamond appraisal, and hired craftsmen to make & repair jewelry.

Nowadays many pawnshops function as a loan service agency on top of being a jeweler. Not to mention almost every pawnshop has a showroom where you can buy affordable retail items. Instead of working against diamond dealers, many pawnshops have adopted the competition and now work side by side.

This is a benefit for both pawn dealers and consumers. Using PawnGuru, you can find a one-stop-shop where you can sell, buy, or pawn your jewelry to a certified professional. If you’re in the market to buy—you’ll get much cheaper prices than a jewelry retail store!

2. Bolsters Inventory

Pawnshops don’t typically order products from wholesale vendors. The majority of their inventory comes from clients opting to keep the cash on their pawn loan and buying items from customers outright. The cycle keeps business flowing but also puts pressure on pawnshops to keep their inventory fresh. In the eyes of a pawnshop, products that stay on the shelves for too long are almost as bad as having empty shelves.

When clients come in with a valuable diamond ring this is a selling point for pawnshops. An honest dealer will give you a fair price because they know the diamond ring will be an impressive piece in their inventory and will also diversify their product line. A shop’s goal is to have eclectic options in quality, style, and price. In some cases, this gives the seller the advantage when bringing a diamond ring to a pawnshop.

3. High Resale Value

If you decide to outright sell your diamond ring you can expect to get good money for it but it’s almost never the case that you’ll break even on the original price you paid. This is the nature of both pawning and selling to consumer-to-consumer. Everything depreciates, and even top-quality diamonds cannot be sold for the original price once they are owned by a consumer.

Often a pawnshop that employs a jeweler will detach the diamond from the ring, polish the diamond, then handcraft a new piece of jewelry. This is not always the case, but it makes good fiscal sense for a pawnshop to ‘refurbish’ the diamond rings they buy before selling them. After a pawnshop refurbishes the jewelry piece they can turn around and sell the piece at a much higher point than they originally bought the ring.

The margin of diamond rings is high because of the saturation of simulants (fake diamonds) and synthetic diamonds on the market. Also, there is a cap of how many carats of natural diamonds that can be mined each year alongside naturally occurring diamonds taking 3 billion years to grow. In other words, there are only so many diamonds out there to push a pawnshop’s profit.

4. Circumstantial Factors

Diamonds are forever but the marriages they symbolize, unfortunately, don’t always last. This creates an unusual but lucrative dynamic for both pawn dealers and those who are looking to sell their diamond rings.

Depending on the circumstances, a person who’s selling a wedding ring would rather have the money than the keepsake. Most jewelers will detach the diamond and put it on a different band while also changing the chips (smaller decorative diamonds). Pawn dealers do this not only to make selling the ring more tasteful but also to increase the jewelry’s value.

5. American Demand

The American demand for diamonds makes up about half of the global diamond mining industry market. 47% of the diamonds that are mined each year will be cut, polished, and crafted in the United States. In 2016, the industry capital was at $80 billion. These key metrics show that the demand for diamonds will continue to grow and is a staple in the U.S. economy.

As with all items of value, this means pawnshops and clients can profit from this valuable commodity. This is why pawnshops are willing to pay high prices for diamonds. A pawnshop’s profit thrives on selling one of the most sought-after items in America—diamonds!

David Stiebel

David Stiebel is one of the cofounders of PawnGuru. David was educated at MIT, where he studied Math. He subsequently worked at Bain as a data scientist before starting PawnGuru in 2015. He started PawnGuru to build a better tool for pawn shops and consumers to connect.

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