For decades, financing and leasing were primarily associated with the automotive and real estate...
Luxury Watch Financing is often misunderstood at first. Luckily, this is only the case at first sight. Once all the questions have been thoroughly discussed, it becomes clear that this new option for purchasing and owning luxury goods is actually a smart decision.
Below, we address some of the most common criticisms and explain alternative perspectives.
We would be happy to discuss these points with you. You can contact us at any time by email (contact@yourasset.com) or via LinkedIn.
1. “Don’t buy luxury if you can’t afford it.”
- Luxury is not only about whether you can afford something; it's also about how you choose to allocate your capital.
- Many high-net-worth individuals use financing strategically, even when they could pay upfront. This enables them to preserve liquidity, invest elsewhere or simply align payments with their income.
- Yourasset always checks the customers financial situation. Only customers who can afford it are able to use financing as payment options.
- Financing is not a necessary tool. It is a financial decision.
- Yourasset enables financing strictly in combination with the purchase of a luxury watch or other luxury product.
- This ensures that financing is used smartly to build assets rather than spending on mere consumption.
2. “Only people who can’t afford it finance.”
- This is one of the most common misconceptions.
- With a regulated financing option only customers who can afford it are able to use financing as a payment method. The customer chooses to allocate some of their surplus income to pay the watch monthly.
- This is unlike 0% financing or BNPL, which do not check financial affordability. With 0% financing customers are NOT protected from the risk of becoming overindebted. Neither are the financing amounts reported to a central credit register to avoid loan stacking.
- In reality, financing is widely used by financially sophisticated individuals, for real estate, cars, art, and more. Luxury watches are no different. After all, they are assets.
- Choosing to finance does not mean lacking funds. It often means choosing flexibility and efficiency. In Switzerland for example interest costs are tax deductible. This makes it especially appealing to high-earning customers.
3. “Financing dilutes the watch brand.”
- Luxury watch brands are built on craftsmanship, heritage, and limited supply, rather than payment methods.
- Financing does not affect the product, the brand positioning, or the ownership experience. It simply changes how the purchase is made.
- The exclusivity of a watch remains exactly the same. Brands choose the supply of their products and their pricing strategy.
- Also, consider the car market. Porsche, Ferrari, Mercedes and Bugatti all have their own financial services units. Financing has become integral and does not dilute the brand.
4. “More people will wear a Rolex because of financing.”
- No – the supply of watches, especially brands like Rolex, is strictly controlled by the brand itself. The payment option has no influence on this.
- Financing does not increase production or availability. It only affects how a buyer chooses to pay.
- Demand may increase, but supply remains unchanged.
- It may encourage more people to become collectors and own multiple watches. Watches have all the characteristics needed to become an established asset class and form part of a portfolio strategy.
- Plus, they can be enjoyed when worn!
5. “You need a car, not a watch.”
- True, but only for people who rely on a car on a daily basis. But, to be fair, no one needs a luxury car for that purpose. Still, people buy them.
- A Porsche or a Mercedes AMG is not a necessity. They are a purchase driven by passion, emotion and identity, as well as utility.
- Luxury watches follow the same logic: they are no longer about utility as we discuss in our Blog article here. They are about meaning, community, a sense of belonging, and identity. Plus, they tell the time.
- Compared to cars, it is also much easier to own and collect multiple watches.
6. “Leasing is cheaper than financing.”
- By looking solely at the advertised interest rate, it may seem that way. However, this is not always the case, as all variables should be considered.
- Leasing locks you in for the financing term. You cannot simply terminate a lease without incurring certain penalty payments. You also pay off the financing amount more slowly because of the residual value. Leasing does not represent ownership, although the customer might have the option to purchase the car at the end of the period.
- Financing provides more flexibility and true ownership rights from the start. You can pay off the financing early without penalty. Interest costs are tax deductible, unlike with leasing for private individuals. Financing has advantages over longer terms, such as 48 and 60 months.
- Yourasset describes the differences in detail in our dedicated blog article here.
- Low Leasing rates of 0% or up to 2% are often used for marketing purposes and subsidized by the car dealer. However, the financial institution must still be compensated for the risk they take over the financing term.
7. “0% Financing or BNPL is cheaper and faster.”
- At first glance, it seems that way. But that’s not true.
- 0% financing bears high costs, which are charged by the financing provider or the bank offering it. These high costs are compensation for the higher default risk (as no financial affordability check is performed), the cost of capital over the financing term (just as with regulated financing) and the lower total earnings per customer.
- These high, payment-related costs are either compensated for by the merchant or added to the price of the watch, which the customer then pays for.
- For NEW watches, it is often the Merchant or the Brand that compensates for these costs. This is similar to providing a discount with another payment method.
- For Pre-owned watches, the cost is almost always charged to the customer by adding it to the fair market price of the watch. Although the cost is hidden, the customer still pays for it.
- Because 0% financing is not regulated, the entire process can be faster as it is not subject to the 14-day legal withdrawal period.
- Yourasset considers 0% financing a suitable payment option for cheaper consumer products and shorter financing terms.
- For Luxury products priced above CHF 5,000 and financed over terms longer than 12 months, we do not recommend it.
- Read the full article about 0% financing compared with regulated financing on our Blog
8. “You should save the money first and buy the watch later.”
This seems like the obvious thing to do. However, two important factors are overlooked: Price inflation and Consistency.
If one thing is for certain, it is the fact that Luxury Brands increase price of their products, such as watches, at least once a year, if not more often. Luxury price inflation often exceeds the normal inflation rate communicated in the media. Luxury price inflation can easily be 3–5% pa.
This means that a Rolex Submariner costing CHF 10,000 today would cost significantly more in four or five years' time. At a rate of 5%, today's retail price of CHF 10,000 would increase to CHF 12,760. This means that your savings target has increased by CHF 2,760 for the same product.
If you apply the strategy of saving now and buying later, however, you must stay consistent with your savings plan. This can be difficult, as once a certain amount has been accumulated, one may be tempted to spend it on other things rather than on a sustainable luxury product as initially planned.
If you buy the watch today using financing, you lock in today's purchase price of CHF 10,000 and pay it off over up to five years. There is the flexibility to repay early at any time. Since the customer pays off the financing amount (i.e. the purchase price) each month, the calculated interest cost may be less than the price inflation.
However, the customer must adhere to the 'savings' down payment schedule for the financing. Consistency is key.
You can read more details how price inflation compares to interest costs in our separate blog article.
In this context, financing is not about accelerating consumption, but about making a financially informed decision in a market where prices are not static.
Final Thoughts
- Luxury watch financing is not about making luxury accessible at any cost.
It is about providing clients with additional options for making and managing high-value purchases. - Yourasset supports the financing of valuable assets, not consumer goods. With a regulated approach.
- If at any time a customer decides to sell the watch or luxury product, this is possible. Yourasset also supports this process to sell your watch.
- Car financing has become the default payment method. From a purely rational perspective, this would be an even smarter option for luxury watches and luxury products.
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