Does price paid control value

Discussion in 'Sidewinders Bar & Grille' started by revtime, Oct 8, 2021.

  1. Andrew Wasson

    Andrew Wasson Senior Stratmaster

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    Yep, I’m not looking to buy any more guitars. I can only play one at a time and I’ve got enough to make all the right noises… Strat, Tele, 335-ish Ibanez, Les Paul-ish Ibanez.
     
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  2. train

    train Fender 1 —the met. Silver Member

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    Value determines cost. Value is subjective ie- one man’s trash etc.
     
  3. muttonbuster

    muttonbuster Strat-O-Master

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    Not to mention, demand is only half of it. Supply is just as important in determining price. Case in point my ESP Kamikaze 1. Not a lot of demand for them. However, that's mitigated by the fact there have probably only been less than 500 made (the ESPs that is which have only ever been made in ESP's little shop in Tokyo; not the LTD version, that's a different ballgame). If you go to Reverb and check the sold listings, there are only two results. If you look at the one that was sold by some dude in Arizona last December, there were 22 watchers and 3 offers. It only appears to be a healthy demand, because they just don't come up for sale that often. If there were thousands of them out there instead of hundreds and they were listed more frequently, that probably would have had more like 8 watchers and one offer.
     
  4. Ebidis

    Ebidis Providing the world with flat bends since 1985

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    Some people make a big deal out of resale value. I never even consider it when buying a guitar. I have never bought a guitar with the intention of selling it.

    Even if I do sell it somewhere down the line, I get what I get for it, and I move on. I guess because I have never looked at guitars as an investment, it really is not at all important to me.
     
  5. jvin248

    jvin248 Senior Stratmaster

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    .

    Gibson and Fender have a brand premium associated with their logos, due to decades of their Marketing Investments. Their guitars will cost more to buy initially and sell for more later. The brand premium on these guitars is $1,000-$2,000 when new.

    The premium on Squier and Epiphone are just that they sell faster 'because new buyers have heard of them'.

    Guitars tend to sell in normal markets for about 60% of comparable new models of that brand. This is problematic for guitar owners when companies like Fender change model names from Baja to Vintera. Now it's hard for general guitar players to get higher prices for their used guitar since it's not clear Vintera=Baja to most and thus they have fewer funds in their pocket to buy a new Fender and may make another choice. If the new guitars go up in price that drags along the used guitar market behind it as long as the models are or can be shown to be equivalent. Clear model stratification and naming is important to the resale market because that resale market funds new purchases. Baja to Vintera was a poor choice but the (MIM) Standard Series to Player Series was a good choice.

    If you are buying guitars, that 60% price target is hard to hit if the owner bought that guitar new -- they remember they spent 100% on it and 'I am not taking that hit' even though all the retail benchmarks show the guitar is selling for 60%. The second+ owner of a guitar are easy to sell at 60% because they bought it less than 100%, maybe they fell into it at 50%.

    Tight supply times like we have now distort the market pricing higher from heavy demand.

    .
     
  6. stormsedge

    stormsedge Senior Stratmaster Gold Supporting Member

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    We are fond of saying the value is whatever price the seller and buyer agree upon...until that moment it is all doodleysquat.

     
  7. knh555

    knh555 Most Honored Senior Member

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    and Supply too
     
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  8. Baelzebub

    Baelzebub Dr. Stratster

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    IMO, no. Prices paid generally dictate market price but I don't equate price and value although they are often related.

    Value comprises intangibles such as utility, merit, usefulness or importance to the individual, and, (outside of groupthink) is subjective and can't be dictated.
     
  9. MT Poteet

    MT Poteet Strat-Talker

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    Simple as that.
     
  10. Guitarmageddon

    Guitarmageddon Dr. Stratster

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    If you spent $5,000 on a Gibson new, it's not worth more than $2500-3000 used, it won't hold value - SUPER common misconception. All guitars retain about 50-70% of original value, no matter what price point - even Squier.....
     
  11. guitarchaeologist

    guitarchaeologist El Salado Guitartist Silver Member

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    Let's not forget inflation and age... both of which contribute to "value"... term used loosely of course, and to basically mean resale value.
    70's Strats are only slightly less available today than they were in the 80s, but in the 80s it seems we couldn't give them away. Same with most of the "student" model guitars and low-watt amps.
    Yet, several factors (demand, inflation, age, etc etc) have dramatically increased the resale value of these items.
     
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  12. bgmacaw

    bgmacaw Strat-O-Master

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    Value to me is if I enjoy playing the guitar or, in the case of partscasters and other builds/mods, do I enjoy doing this work. As others have mentioned, I don't buy guitars to use a few months and flip. In fact, I very rarely sell a guitar that I bought or built/modded for myself.

    I can see someone else evaluating value to them differently though.
     
  13. amstratnut

    amstratnut Peace thru Music.

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    Im not an expert on cars but, Id use an analogy anyway.

    A Mercedes Benz fulfills all the requirements to get you anywhere you wanna go.

    So does a Hyundai.

    There are likely real differences and, "perceived" differences that affect desirability of these cars, thereby affecting new sale prices as well as used.

    Id say most items one can buy are affected the same way.

    Is the tinfoil hat I made from dollar store foil any better or worse than the tinfoil hat I got from walmart? Any more or less value? Any real or perceived differences?

    It doesn't seem complicated.
     
  14. archetype

    archetype Senior Stratmaster Silver Member

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    The OP believed price = value, but then provided a perfect example of how demand = value, instead. What comprises demand and value is a complex equation for each. Those are just inputs, though, for the final equation... Demand = value.
     
  15. cranky

    cranky Senior Stratmaster

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    There's an allure to the Japanese-made guitar that Mexico, Indonesia, Korea and China don't have. Especially if we go back to the 80s and earlier.

    Probably has something to do with Japan's decades of dominance in electronics and automobiles.

    Probably has something to do with Japanese influences in American pop culture, too. But by that token, Korean guitars should be growing in allure, too.
     
  16. Intune

    Intune Senior Stratmaster

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    It all depends on the guitar. Not every fender or Gibson holds value.

    Taking you $5000 Gibson comment, if you walked out the door with it new for $5000. You will probably loose out if selling a few months later. Not $2500-$3000 probably closer to $4000.

    Hold onto it for 5 years or more and you’ll probably get close to retail for it. As the new ones keep going up in price.

    I’m not making this up you can see this on reverb all day long. Search a 58 reissue les Paul, filter to sold items and you can see the older ones have sold for pretty much what the retail was when new.

    You can do the same search with a fender custom shop. Same results but most cases the olde fender CS is selling for more than resale was.

    https://reverb.com/marketplace?query=gibson les paul 1958 reissue&show_only_sold=true

    Here’s some 90’s custom shop sold listings

    https://reverb.com/marketplace?query=fender custom shop&make=fender&decades=199&show_only_sold=true
     
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  17. muttonbuster

    muttonbuster Strat-O-Master

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    I think it has to do with the fact that the Japanese took to playing electric guitar like no other country in the world, allowing them to spawn a really robust domestic guitar market. If you Google Tokyo guitar stores and look at a map, it's mind blowing. I was walking around Shibuya about ten years ago, and just couldn't believe it. It was like ten Guitar Centers worth of volume in that ward alone.



    And as the Japanese are, I'm sure plenty like American guitars, but even more want Japanese built guitars which required their own luthiers. They stormed the scene with the lawsuit guitars, and Fender and Jackson's verdict was "we'd be idiots not to start building there". Ibanez and ESP went through the same process as Fender and Gibson. Cost of Japanese labor shoots through the roof, and there is enough demand for their own brands that they start outsourcing themselves.
     
  18. CalicoSkies

    CalicoSkies Most Honored Senior Member Gold Supporting Member

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    I think what affects a guitar's value is its demand (as has been said), brand recognition, and its perceived quality.
    I don't think it matters what you paid for it (particularly when you consider that some stores might have sales sometimes, and what you paid might be lower than its original MSRP).

    There are a number of factors that could contribute to a guitar's value, but I think the price you paid for it initially is probably the least of those factors. Few people will be concerned with what you paid for it.
     
  19. systolsys

    systolsys Strat-O-Master

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    Value is what somebody would pay for it if you put it up for sale now. That's it.

    If you say to yourself "This is worth $5000", but nobody is willing to pay you more than $3500, then it's not worth $5000. I may not be worth $3500 - it's only an estimate until the value.

    The less differentiated an item, the easier it is to estimate the item is exchanged for cash. At which point, the value remains an estimate again until the next sale.

    There are two obvious examples are shares/stocks and residential house - the two most common investment vehicles. There can be millions of millions of shares in a company, and they are absolutely identical. Nobody cares if your share was issued when the company was created, or if it was past of a recent allocation. You know what your share is worth in all but the most illiquid stocks will fetch on the open market because you know what an identical share traded for in the last couple of minutes. Yeah... there might be a couple of cents either way, but unless you're in a crash or a bubble, you'll probably get that asking price sooner rather than later. You also don't care who buys it... anybody can pick it up and will pay the same price.

    Sure... some analyst might run the numbers and say company X is worth 20% more or 10% less than the current price... but if it can't be converted to cash, it's just a theoretical number.

    Houses are more complex. Every single one is unique: location, desirability, aspect, construction, size, age, condition. You can get a first estimate based on similar houses in the local market, but you won't know exactly what it's worth until it sells. And depending on who looks at ... and how closely it matches their dream... will drive the final price.

    Most guitars are more like houses than shares - you can estimate what your guitar is worth based on similar guitars, but in the end, it's worth what somebody will pay for it on the day. And that will depend on the colour, the age, the desirability, the availability of substitutes.

    Does scarcity imply greater value? Does quality? Not necessarily. There are more Nocasters on the market than either of the guitars that are sitting he in front of me. Probably by a factor of 100. Both of my guitars are unique because I built them. They have better components than the broadcasters because they're made using modern construction techniques... but they aren't going to sell for a fraction of the price of a Nocaster.
     
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  20. CB91710

    CB91710 No GAS shortage here Double Platinum Supporting Member

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    Yes.... and no.

    The cost when new has an impact on the resale primarily because nobody is going to be willing to buy your used $400 guitar for $400 when they can buy a new one for $400.
    But the same holds true for a $5000 guitar.

    Whether or not that $5000 guitar actually holds value depends on dozens of things, including the general market, current events (betcha an EVH goes for more today than it did 14 months ago), general economic factors.....

    Taking these things into consideration, that $400 guitar will likely ALWAYS be a $250-$350 resale... but in times of steep recession and reduced disposable income, that $5000 guitar might only go for $1500.... and it's going to be tough to get more than $4000 for it.


    Ultimately, it is foolish to consider any guitar (or vehicle) to be an "investment"
    Nobody can predict what is going to happen in the future that might make a particular model more desired, but the root of the issue is that they are making millions of guitars.
    Vintage guitars are worth a lot because they aren't making them anymore... and they only made a few hundred thousand a year... most have not survived.
    Those that are already desired are poor investments because at any given time, you don't know where they are on their relative value curve, but generally safe to assume that 2021 is not the time to "jump in"