June 7, 2019 | 4 Min Read

Are Pawnshop Diamonds Real?

If you’ve ever been into a pawnshop and priced some of the jewelry in the showcases, you’ve probably asked yourself this same question.

“How can this diamond ring be real when they are only selling it for $299?”

If you haven’t asked yourself that question before, or maybe you’ve never even been into a pawnshop - I'll explain why this question is so common.

You see, the majority of jewelry in our case is less than $500 per piece. Seriously. Our average price per piece of jewelry is somewhere around $300-$400.

And no. It’s not fake.

Real gold. Real silver. Real diamonds. All real jewelry.

In fact, every single piece of jewelry we have in our shop started off in a jewelry store somewhere, and then finally ended up for sale with us.

So what’s the difference? Why are diamond rings in jewelry stores like Kay’s or Zale’s $5,000 and then pawnshop diamond rings are $500? This makes me think that pawnshop rings are fake!

Now we’re asking the right questions! Let’s dig a little deeper and find out the answers:

Why are Jewelry Stores SO Expensive?

Here’s the short answer. The reason why jewelry stores are so expensive is because they have a HUGE profit margin. I mean HUGE.

But to be honest, it’s kind of a necessity to make their business work. In order for them to stay in business they either have to make a ton of sales or a ton of profit. One or the other has to happen, and let’s face it: people aren’t buying jewelry every single day.

This isn’t Publix or Walmart where they have thousands of customers per day. Most jewelry stores make only a handful of sales each day, which means that their profit margins have to be MUCH higher in order to stay in business.

Think about all the expenses a jewelry store has. Most of the time they are in nice corner locations in the mall (this means HIGH rent). Then they have to pay employees, benefits, utilities, etc. The list goes on and on. In order to cover all of these expenses and still turn a profit, they have to price their jewelry VERY high.

The fact of the matter is - jewelry stores are more expensive than pawnshops because the pawnshop removes the insane markup that jewelry stores must make in order to stay in business.

Does This Mean my Diamond Ring Isn’t Valuable?

Not at all! Diamonds and jewelry will always be valuable and sought after. They are just not quite as valuable as jewelry stores require you to pay!

Think of it this way.

Let’s say you’re looking to buy a specific vehicle. So you visit one car lot, find the vehicle, and they have it for sale for $35,000. Instead of buying it, you decide to do your due diligence and shop around. While shopping around you find the exact same car at another dealership for $28,000.

If the cars are exactly the same except the price, is one car less valuable than the other? Of course not! You just found a good deal and were able to capitalize on it!

the 3 different ways that jewelry is valued

Typically, there are three different ways that someone can value their jewelry. Two are related, and one is not. Let’s go through them quickly.

1. Gold Value (Precious Metal Value)

The gold that is used in the piece of jewelry is valued through the gold market. Think of it like the stock market, where the price changes slightly every single day. Some days it’s up, and some days it’s down. The gold market price gives us a good idea of how much the gold in the piece of jewelry is actually worth. Not the maybe value. The definite value of the gold!

2. Diamond Value

Diamonds are valued as well, just not on the market. Most diamonds are valued through historical sales at auctions. So when diamonds are sold at auction, the price at which they are sold is recorded and this gives you a good idea of what your diamond is worth. Keep in mind diamonds are classified by their color, clarity, cut and carat. These 4 qualities make up the 4 C’s of a diamond and have A LOT to do with what they sale for.

3. Appraisal Value

This value is more for insurance replacement purposes and less about resale value. If you have a piece of jewelry appraised, you are getting a certified value from someone saying that it would cost $X to replace your piece if it were lost of stolen. The $X price is based off what a BRAND NEW piece of jewelry would cost. Not used. This means you would have to go to a jewelry store and pay the high price to replace it. This is typically why insurance appraisals are much more than what a pawnshop will pay for your jewelry. It is based off the new retail price, not the used market value.

wrap-up

Jewelry stores and pawnshops sell the same products, but at different prices. It’s that simple. When you buy a piece of jewelry from a jewelry store, you are paying a markup for the brand new piece of jewelry. Much like when you buy a new car vs. a used car.

That being said, pawnshop jewelry is just as real as the jewelry at a jewelry store. Real diamonds. Real gold. Real silver. Real everything.

Here’s a tip! If you’re looking to buy a new piece of jewelry, don’t just go straight to the jewelry store. Shop around at pawnshops. Be patient and eventually you will find that awesome deal that you’ve been looking for!