If you’re new to buying and/or selling coins then it’ll be a really big help to you to understand just how the market actually works. One of the main problems in the market is the difference between what the consumer or hobbyist expects from a dealer and what the dealer expects to give to the hobbyist.
The average consumer believes that the dealer should – and will – offer a fair price and the dealer wants to offer the lowest price possible to maintain their profit margins. If the hobbyist comes along with a batch of nigh-on worthless coins and leaves disappointed with the offer, then they should have done their homework, or at least visited a website or two, first!
The two types of coin dealer
There’s basically the wholesaler and the retailer. The wholesaler has to “get out there” to bring as many new coins into the market as possible, by going to shows and auctions and by advertising. Once the new stock comes in, the wholesaler sells it in bulk batches to retailers.
The retailers get their stock mainly from the wholesalers, as you may have gathered, but some also go to coin shows and also scout their local areas. They sell on mainly to people who buy coins singly or in very small lots.
You may find that retailers can offer better prices, but whichever dealer you go with, you must make sure that you have some legal recourse if things go wrong.
Wholesale dealer prices
If you can find out what sort of prices a particular coin dealer pays for coins, you have more chance of negotiating a decent price. There’s the Coin Dealer Newsletter, for example, which comes out weekly. The CDN, as it’s known, lists the bid and ask prices for the major US coins, as well as the prices for slabbed coins, mint sets and banknotes.
The bid price is the price a dealer brings the coins another dealer, while an ask price is the price when a dealer wants to buy them. It’s important to remember, especially if you’re reading the CDN, that you’re looking at wholesale prices.
The profit margins
Then again, if the dealer buys a rarer coin, like a 1931 Wheat Cent in good condition then you might get $50 for it and the dealer will probably sell it for $60. This coin will sell faster than the 1940 coin, as well as making the dealer $10. That $10 is only a 20% profit, though; so, margins count.
Generally, with wholesale coin dealing, the more valuable coins don’t need to have a huge profit margin. If a dealer buys a coin for $5,000, then selling it on for $5,500 – a 10% profit – still means $500 for the dealer. It’s important for the coin to sell rapidly so that the dealer can recoup the original $5,000 (plus the profit, of course).
Striking a balance
To make a success of dealing, the dealer has to strike a balance between market demand (how rapidly the coin sells on), the state of the overall coin market and how much the coin was bought for originally. It can be tricky, but it’s doable…
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