The Very Highest Quality Advice...
Why The Price Drop?||
Does The Royal Mint Overcharge?
Yesterday 26th July 2000, I saw a thread on the Royal Mint's Forum section of its web site, which started with someone complaining about poor secondary market prices for Royal Mint products.
The writer was a little more direct than that, and was quite open about accusing the Royal Mint of overcharging.
This page is a close copy of our posting to the Royal Mint's Forum, addressed originally to the webmaster.
I was going to post a reply to the thread but cannot now find it. Do I presume correctly that you have removed it?
If so, I can understand why, but surely it would be better to allow open debate, even if it criticises the R.M., but follow it up with a good answer.
Here are a few thoughts for the complainer:-
Why do you think people buy coins and coin sets?
- Hopefully for most people, it's for one of the following reasons:-
- Because they derive pleasure from owning them.
- Most coins could be considered as numismatic or medallic art - a miniature piece of sculpture.
- As a memento, of an occasion or a year.
- As a gift.
- To satisfy the magpie instinct which appears to be present in most of us.
- As a reminder of a particular country.
- They may have educational value.
- Is it fair or accurate to complain that the Royal Mint overcharges?
- Most of the collector coins produced by the Royal Mint are produced to a superior finish compared with the normal issues.
- There is a demand for these superior coins.
- It costs time, effort and money to produce special high quality finished coins.
- It costs time, effort and money to produce special or new designs to appeal to the public and collectors alike.
- Most people buying a collectors coin want it to be nicely packaged and presented. This costs money.
- To let people know that coins are available, they need to be marketed. This costs money. The alternative is not to market coins actively, but sales of special coins would be lower, so that the increased production cost per item would increase. there would be less variety produced.
- The Royal Mint is not responsible for secondary market prices, although if it gave more support to dealers, making photographs and other information available, this could help dealers, The Royal Mint, and its customers. Think of it as after sales service and support.
- Many Royal Mint issues sell out. If they were overpriced, would this happen?
- Coins are not a necessity of life. Nobody has to buy them. They are all sold to people who volunteer to buy them.
- VAT has to be charged on almost all coins. This is not the Royal Mint's fault. At least it only gets paid when people voluntarily buy a coin, compared with income tax, where there is much less choice.
- What other consumer purchase can you think of which gives a good return for the amount spent? The most common suggestion here is "a home", but houses need money and effort spent to maintain them. Even houses do not always go up in value. Why expect coins to increase in resale value? What percentage drop is acceptable or reasonable?
- What alternatives are there?
- I have long believed that older coins provide better value for money than new coins. It is possible to buy nice condition Roman coins for under £10 each, including both silver and base metal, and most are under £100 each. Pre-decimal coins can be bought for a few pounds each, even mint condition ones are often less than the cost of a newly issued collectors coin. Part of the reason for this is that older coins are only available in moderate or small quantities, so it is difficult for them to be marketed. Sadly almost everything needs to be marketed these days. This can work to the advantage of the thinking person, who can take advantage of the ready availability of lots of cheap old coins.
- If you don't want to lose money on a collection of modern coins, be patient. Consider waiting a few years until prices come down, be prepared to wait until your local, or favourite, dealer has some surplus stock. Buy bargains instead of complaining about them.
- As for non-coin purchases, if the complainer smokes, has he ever stopped to calculate that (in the U.K.) 20 cigarettes daily works out to about £1400 per annum. What does anybody ever get from smoking apart form lung cancer, heart problems, bronchitis, asthma, gangrene, and many other self-inflicted diseases? You certainly won't get your money back!
- Don't buy coins as an investment.
- While it is possible to make successful investments in coins, like most investments it needs careful thinking and planning. Any experienced investor will be able to tell you that there is a risk factor. You only have yourself to blame if you make mistakes.
- Sadly many people only, or mainly, buy coins from a greed motivation. They expect them to go up in value, and to be able to sell at a profit. These same rather naive people are usually the bitterest complainers when they come to sell, presumably because they are the most disappointed. After all, they have probably missed out on all the other pleasures of ownership.
- Think before you buy, not when you want to sell.
- By the way, if you are disappointed at the second-hand prices you are offered when you wish to sell, please don't take shoot the messenger. By this I mean that if you are upset because you realise you are faced with a loss, you should think about this before or at purchase time. You volunteered to buy, nobody forced you to, nobody is forcing you to sell or accept the offer you are given, don't take it out on the poor dealer. Most dealers pay reasonably competitive prices. You can always shop around.
- We also see this happen time after time with other consumer purchases, particularly jewellery and watches. People ask stupid questions such as "Why is this only worth £100, when I paid £1000 for it?" The question would be better asked the other way round "Why did I pay £1000 for this in the first place, and why didn't I shop around for a better deal at the time?"
- Auctions versus Dealers
- We note that auction prices were cited. It is strange that many people automatically believe they will get a better price at auction, or that they will get a better buy at auction. While we would not argue with the theory behind auctions, that they find open market prices, we believe many people would get better deals selling or buying through a dealer.
- Auction houses, like all other businesses face competition, and have seen expenses increase considerably in recent years. Auction houses have to spend money on producing catalogues and in advertising, otherwise they would attract no sellers and no buyers. Most auction houses now charge about 15% to 20% commission to the seller, and most charge 10% to 15% buyers premium also. There is VAT to pay on both lots of charges, which cannot usually be reclaimed. This means that the "spread" between prices the seller realises and the buyer pays can be between 23.5% (unusually low) and 41.12% (rather high), with most at about 30%. As an example, we recently purchased multiple lots in a coin auction. We paid about £95 each for the items, the vendor got about £70 each. If the vendor had approached us directly we would have been delighted to pay between £80 to £85 each, and he would have got paid immediately.
Is the Royal Mint perfect? Does it always get things right? We think not.
If you want to find the value of a coin you own, please take a look at our page I've Found An Old Coin, What's It Worth?
What do you think?
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