Cost Analysis of the New Sub C (or any Rolex for that matter)

[Casey VP-26]

Originally Posted by BradH

I did a similar cost of ownership exercise before purchasing my first Rolex, a lightly used GMT IIC that I picked up last week. I estimated the monthly cost of ownership over a 10 year period.

I bought the watch for $5260 and figured in 10 years I could probably resell it for roughly $3500. I also factored in $600 every 5 years for a full service at the RSC and $70 per year to insure the watch.

So depreciation is $176/year over 10 years, service is $120/year, and insurance is $70/year.

With those assumptions, the cost of ownership worked out to $30.49 per month.

Another Day...Another Dollar

[jeremyam]

Originally Posted by Dan2010

I'm a finance guy so I wanted to do a little cost of ownership analysis on the new Sub C since there are a great many people who think it's too much for a SS watch. This analysis can apply to any Rolex for that matter.

I will use my own recent purchase of the Sub C as an example. I paid $7,600 after sales tax. Now a Rolex will last what, 50, 75, 100 years? Lets say it will last for 75 years. Exclude the regular watch maintenance cost every 5-7 years as all Rolex's will require this.

If I take the cost of $7,600 and divide it by 75 years you get $101. This is my annual cost of owning this watch. Now will I personally get to enjoy this watch for the next 75 years? Odds are probably not but between myself and giving it to one of my kids someday, we will get 75 years of use out of it. When you break it down, $101 a year aint bad to own this or any other Rolex that has such longevity. But wait, it gets better. In 75 years, if one of my kids wants to sell this "vintage Sub C", I can almost guarantee you they will get more than $7,600 that dear old dad paid way back when. So guess what, the only real cost has been the cost of the maintenance and that is assuming that one of the kids sells it only for $7,600. If they sell it for more someday, the premium may even cover that cost too. In the end, we quite possibly owned this great watch for FREE. And for all you other finance geeks, yes I am ignoring the time value of money in this analysis.

Now is it a great INVESTMENT? I never said that. I just analyzed the cost of ownership. Could I have used that $7,600 and turned it into more money. Well duh. But I wouldn't have enjoyed it as much as owning something as fine as this Rolex. Could I of waited and gotten a better deal? Well duh again but remember this analysis can be applied to that $10,000 Daytona too. For me, I was willing to pay the premium.

The whole point of this is, if you plan on keeping the Sub C or any other watch for the long term, you may find the cost is not so bad after all.

You cost-benefit analysis is about 50% right and 50% wrong. I'm glad that you understand that there are better investments, especially with a 75 year time horizion. I would, as others have already, point to the cost of upkeep- with recommended service intervals 5-7 years. Assuming the current cost of $750 and being very generous in assuming that number does not increase and you service every 6 years, you're looking at $12,500.00 Making the total cost of owning the watch, $20,100.00- a rather staggering figure but this model reflects the cost of ownership on the majority of cars and definitely boats.

Most people don't keep their watches for 75 years. This is where I have an issue with your findings. My first question and really only one, would be: How old was this person when they acquired this watch?

I think you've taken a very extreme example and used it as a basis to arrive at a conclusion that applies to .5% of Rolex owners. You rightfully acknowledge that a "premium" exist- I believe the annual cost of owning the model, Sub C is more than 2.5x your amount. For the watch to have paid for itself after the dust has settled, you'd have to have beaten 1-2% inflation over a 75 year period... and be alive at 100 years old or something like that to realize you cost-benefit conclusion.

I'm sorry but I think this is misleading and grossly inaccurate.

[marke]

For every Rolex there is always " MasterCard " priceless ha ha

[Dan2010]

Originally Posted by jeremyam

You cost-benefit analysis is about 50% right and 50% wrong. I'm glad that you understand that there are better investments, especially with a 75 year time horizion. I would, as others have already, point to the cost of upkeep- with recommended service intervals 5-7 years. Assuming the current cost of $750 and being very generous in assuming that number does not increase and you service every 6 years, you're looking at $12,500.00 Making the total cost of owning the watch, $20,100.00- a rather staggering figure but this model reflects the cost of ownership on the majority of cars and definitely boats.

Most people don't keep their watches for 75 years. This is where I have an issue with your findings. My first question and really only one, would be: How old was this person when they acquired this watch?

I think you've taken a very extreme example and used it as a basis to arrive at a conclusion that applies to .5% of Rolex owners. You rightfully acknowledge that a "premium" exist- I believe the annual cost of owning the model, Sub C is more than 2.5x your amount. For the watch to have paid for itself after the dust has settled, you'd have to have beaten 1-2% inflation over a 75 year period... and be alive at 100 years old or something like that to realize you cost-benefit conclusion.

I'm sorry but I think this is misleading and grossly inaccurate.

1) Cars and boats do nothing but depreciate and there is better than decent chance that the watch will appreciate over that span of time. There is also a much better chance the watch will be around WAY longer than a boat or car. I also pointed out that the watch is NOT an investment but a cost of ownership analysis.

2) Doesn't really matter how old you are when you buy the watch if you plan on passing it on to a family member as I said would be done in my analysis. I said it would LAST 75 years and in my example I said one of my kids would also enjoy it during this time period. I specifically said that I would not get to enjoy it 75 years. Obviously, if you only planning on keeping it until you die or sell it in the short term, this analysis does not apply to you.

3) Assuming you are correct in that my annual cost is 2.5 times off, thats ok, it still only costs a little over $300 a year to own. Again, this is not an investment analysis and I am not arguing you could do better in gaining a profit with that $300 a year on something else.

4) The whole point of my thread was to get people to think. If you have a long term horizon, the cost of that expensive watch may not be as bad as you think. If you time horizon is shorter, just substitue the numbers and see what YOUR cost of ownership is. Remember if your time horizon is shorter, you have less maintenance cost as well. Also, ANY watch you have is going to have maintenance cost so it's almost irrelevant if you are going to play the watch game.

5) Thanks but this analysis is not misleading nor grossly inaccurate.

[ingoodtime]

Originally Posted by Singslinger

Yes, the Mayan calendar ends on 23 Dec 2012 which some people believe is the end of it all. Better buy and enjoy as much as possible before it's too late!

Lets see....end of world 2012, cost of 18kt GMTIIC about 25 grand so ...12.5 grand per year....my wife is going to kill me long before 2012 comes around!

[Singslinger]

I would only add that much depends on the watch in question having a decent (or half-decent) resale value decades down the road. With Rolex the chances are high that this will be the case, and the same applies with some - though not all - of the top-echelon brands like Patek, AP, VC and Panerai.

Great thread, by the way!

[jnkay]

If only Rolex designed its bracelets to last 75 years with regular 5 year polishing! Replacing the bracelet after 30 years would add another $9000 plus to the cost of ownership.

[Dan2010]

Originally Posted by Singslinger

I would only add that much depends on the watch in question having a decent (or half-decent) resale value decades down the road. With Rolex the chances are high that this will be the case, and the same applies with some - though not all - of the top-echelon brands like Patek, AP, VC and Panerai.

Great thread, by the way!

I agree, that there a lot of variables that one has no control over, one being resale value. As with any projection, particularly one over a 75 year span, it is nothing but an educated guess.

[Dan2010]

Originally Posted by jnkay

If only Rolex designed its bracelets to last 75 years with regular 5 year polishing! Replacing the bracelet after 30 years would add another $9000 plus to the cost of ownership.

True, but if your a true WIS, you are going to spend that $9,000 on another watch anyways!

[rolexdeepsea]

that a very very good point when you look at it that way!!

[SCD]

Originally Posted by Dan2010

Could I have used that $7,600 and turned it into more money. Well duh.

Duh indeed! Let's take a closer look at the opportunity cost... $7,600 compounded at a yearly rate of 7.5% gains one might get from the stock market yields a net gain of just a hair over
$1,715,000

[Dan2010]

Originally Posted by SCD

Duh indeed! Let's take a closer look at the opportunity cost... $7,600 compounded at a yearly rate of 7.5% gains one might get from the stock market yields a net gain of just a hair over
$1,715,000

Thats why its not a good INVESTMENT! However, you can have the watch and instead of buying ANOTHER watch, invest that money and get your $1,715,00. Have your cake and eat it too.

[Big_S]

Did you figure in Spousal Tax...?

http://www.rolexforums.com/showthrea...ht=spousal+tax

[Dan2010]

Originally Posted by Big_S

Did you figure in Spousal Tax...?

http://www.rolexforums.com/showthrea...ht=spousal+tax

No.

[gimpex]

Originally Posted by SCD

Duh indeed! Let's take a closer look at the opportunity cost... $7,600 compounded at a yearly rate of 7.5% gains one might get from the stock market yields a net gain of just a hair over
$1,715,000

and on the other hand (no pun intended) you might not.... with a Rolex , at least you WILL have the pleasure

[Tools]

Your analysis isn't your cost of ownership. It is simply the purchase price divided by an arbitrary number of years.. hardly an "analysis" and fails in several areas..

First, you are assuming that it is in the "family" for that long..... all well and good, but that isn't your term of ownership. If you croak next year, then your "cost of ownership per year" was $7600 for the single year that you had it. For whom ever else gets the watch, their cost is zero for the next 74 years (plus any maintenance costs)

[dligg72]

My SS Date-Just was $1200 in 1989,. That was 21 years ago. A new SS Date-Just sells for around $7000 today.

[EE33]

Originally Posted by Tools

(plus any maintenance costs)

Apprently we're not allowed to bring the maintenance cost into the equation

[Dan2010]

Originally Posted by Tools

Your analysis isn't your cost of ownership. It is simply the purchase price divided by an arbitrary number of years.. hardly an "anlysis" and fails in several areas..

First, you are assuming that it is in the "family" for that long..... all well and good, but that isn't your term of ownership. If you croak next year, then your "cost of ownership per year" was $7600 for the single year that you had it. For whom ever else gets the watch, their cost is zero for the next 74 years (plus any maintenance costs)

Yes, this does analyze your cost of ownership and when I was talking about the term of ownership, I SPECIFICALLY said in MY analysis it included passing it on. I just broke it down in your cost per year to show that if you keep the watch over the long term, you cost becomes much more palatable. Also, if you resell it you have the potential of recouping some or all of your costs back. If one does the analysis for themselves, THEIR parameters will be different thus getting a different result.

And yes, I did "assume" that it would stay in the family that long. If it doesn't, then the analysis is off. In any financial model, you make "assumptions" that are subject to change as facts and circumstances change. Thats why there are limitations in any projections. Again, the point of the thread, is to get people to think.

What do I know though, I'm just a CFO of company who does this for a living. I have no clue.

[Dan2010]

Originally Posted by dligg72

My SS Date-Just was $1200 in 1989,. That was 21 years ago. A new SS Date-Just sells for around $7000 today.

Yes and I bet if you sold it today you would get what you paid for it back in 1989 plus the cost of maintenance over the years. Potentially, you could have enjoyed this watch for free in a much shorter time period then the 75 year frame I used in my analysis. Not too bad if you ask me.

Of course as it has been pointed out, my analysis is flawed. Oh wait, it's not even an analysis I am told.

[EE33]

I forgot to mention factoring in the cost of the odd TRF GTG as well

[ecorl]

I saw this post and looked at it a little differently.

Future value (FV) of $7600 in 45 yrs at a risk free rate of return (30 yr T-bill, 3.7%)
FV = 7600*(1+.037)^45 = $38,981
I then though how crazy it was to think you'd sell the watch in 45 years for nearly $40,000 in 45 years.

Then my dad let me borrow his 1973 GMT which my mom purchased for him for $350 and I started thinking again.

FV = 350*(1+.037)^37 = $1342
he just had it serviced at an AD and the sales guy offered him $5000

I know the 30yr T-bill rate had been significantly higher and most likely will increase in the future, but still (T-bill, 7%)

FV = 350*(1+.07)^37= $4278
and I don't know this to be an extremely collectible watch