Margins on High End Coins ?

What is a reasonable margin to expect of a dealer to make when purchasing "higher end" but still working class coins? For example: If Joe Bob is looking to spend $3,000-10,000 on a coin, how much profit would be considered fair for the dealer to make? If Joe Bob sells the same coin back to the dealer or another dealer, how much would he expect to receive? If he pays $5,000 to Dealer A, is it fair for Dealer A to profit $3,000 or closer to only $500? If Joe Bob tries to sell the coin to Dealer B, would Dealer B only offer $2,000 or closer to $4,500?

This is assuming all players are honest and ethical. What is common practice?

 

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I would say it will always depend on the coin. A $5000 coin with a problem, or an esoteric issue hard to find a buyer for will deserve a higher haircut than a very much desired coin the dealer has 5 collectors willing to buy it tomorrow. Made up examples might be a decent flowing hair dollar with a major rim bruise or scratch versus a AG 1901s quarter, (please do not beat me up on prices, I am just guessing both are worth around $5k today, but I haven't collected US for years). One is a nice coin but the problem will llimit the market, while the other is just a lower grade coin, but HIGHLY sought by many collectors. In that case I would expect an offer on the "problem" coin to be further back from retail than the problem free, sought example.

No real rule of thumb, but when the numbers get bigger the dealers can afford to take lower percentage, so I think your $500 is a good figure for a "normal" $5000 coin, not $2000. If you get an offer 40% back on a $5000 coin, I would shop around personally, or put it in a high quality auction.

 

Thanks for your feedback. I should of thought about the marketability because of issues affecting mark-up / mark-downs. I am flying to attend a coin show within the next month or so; I'm considering purchasing a higher priced coin or two ($1500-3000) and wanting to move in that direction. I feel more reward having to save and pursue that "it" coin rather than having truckloads of common date, circulated Morgans flowing into my home.

I guess I also do not like the disparity between wholesale prices and retail prices. I think having 1 price with a mark-up/down makes more sense. How can you "wholesale" something that is 1 of a kind? I've operated a clothing & accessories business before, that is wholesale to retail. I feel that if a dealer is willing to "wholesale" it to another dealer at a price, I should be able to purchase it at that same price. What difference does it make to the selling dealer?

 

Interesting question that touches on the everlasting "How do I make money on coins" question.

 

I don't believe in purchasing things solely because I want to make money on it. I do not think that is a sustainable business model. Not to sound cliché but I honestly just purchase coins that I like. That being said, I want the transaction to be fair for all parties.

 

I would not turn down making money either. I recently bought a 50 rupee coin from a flea market dealer for $13 and in talking to him, he looked it up in Krause (I know you can't trust the prices in Krause) and it listed for $100. However he didn't want the coin and I did. Should I have offered him more money?

 

That doesn't answer the question at all. I feel this response is a carry-over from your post quoting my response on the previous thread. I am pro-capitalist. I am not a "spread the wealth" liberal. I believe you misinterpreted my original quote and are henceforth trying to debate me politically.

I am not saying what should he be capped at making profit-wise. I'm saying if he were to be fair, reasonable and inline with what the other dealers are doing, what should be expected?

 

Expect the unexpected : - )

 

I've bought and sold some $1,000 dollar coins. If I could make a quick couple hundred doing it, I would go ahead and pull the trigger.

 

That is off-topic from what I am asking in my thread. That is a one-time opportunity and a situational-ethics related question.

I did chuckle at your "expect the unexpected" comment.

 

So $200 on $1000 is fair and reasonable to you? I personally see nothing wrong with that. I would do the same thing every time.

I guess my real underlying question here is why do dealers have prices to other dealers that differ from what they will charge "normal" customers? As a customer I have a hard time paying retail for something that the dealer has "wholesaled" back and forth between other dealers all day. I want the same prices the other guys in the room are getting. I don't care if you call me a customer, a "dealer" or the president of Sudan.

 

Thanks for not being offended. Actually you ask what is expected and what is fair. That is different for each situation. With American standard type coins, perhaps it is a little more standardized and I too would be interested to see responses.

 

The dealer may ATTEMPT to make as much or little as he wants, but the question was from the seller's side Doug. He was asking what is a fair offer for a certain type of coin. A dealer of course is free to only offer him $2000 for a coin whose going price at regular venues, (like coin shows and major auctions), is $5000 but the seller should not sell at that price. If its a "normal" coin such an offer is below what I would conside fair. Therefor, I was saying to not accept such an offer, shop it around, and maybe list in an auction instead of getting abused like that. I own a nice F 1803 Bust dollar. Let's say the book is $2000, (I have no idea). I agree a dealer is free to offer me $800 for it if he wishes, but I believe I would be dumb to accept that offer.

 

Exactly.

I'm also asking from the buyer's point of view. I've been at a show where two dealers at a booth were wholesaling each other coins. I do not interrupt their sale. I come back to both dealers later and they are asking prices well above what I heard them offering to sell to each other at. The dealers did not appear to have a relationship other than finding each other at the show.

 

Well, that will be harder. You don't know what relationship these dealers have, what agreements, etc. Trying to say you should be able to buy at the same wholesale they buy and sell at will be difficult at best. You are a retail customer, they will not offer you in all likelihood the wholesale price. Dealers have a lot of expenses going to shows, and deserve a fair profit. I am not denying that in the least. If they sold everything to retail customers at wholesale prices, why would they incur the expenses of a show?

 

So, the moral of the story is that it is not OK to make large profits off little, old widows, but it is OK to make large profits off of big, young, married men?

Seems a bit patronizing to little, old widows.

 

I'm not questioning the amount of profit. You can buy a coin for 25 cents and sell it for $10K and be fine. It happens. I'm saying if you buy a coin and offer it to other dealers for $5K, why do I have to pay $10K? That doesn't make sense. If it is worth x, it is worth x. It is not "worth" x to dealers but y to retail customers. If you were going to sell 100 Morgan dollars to somebody, I imagine that the price per Morgan would be lower than if Jimmy from the block were trying to buy 1 Morgan. But if you have a rare-date Morgan, why is there a disparity of price between retail customers and dealers?