Thursday, October 13, 2011

Is it Okay to Buy Sightly Damaged Used Goods on Craigslist?

This scenario comes up now and then. A seller will post an item with some cosmetic damage that has no actual bearing on the operation of the camera or lens itself. Another possibility is that the seller is posting a lens with a visible scratch on the front element that for all intents and purpose has no real world impact on the final image quality. (And as working pros will tell you, minor scratches really don't affect image quality as much you thin they might.) In either case, the seller is up front about the damage and has priced the item lower to compensate fairly for the wear.

The question then becomes... if there is no material degradation to operation or image quality, is it a good deal to purchase the discounted item? This, of course, assumes that you are willing to live with the cosmetic damage. If you plan to never resell the item, then it is really a matter of personal choice. However, if you do plan to resell it, then the calculus becomes a little more stark.

If you buy a pristine used item at fair market value, then you will likely get whatever the future fair market value is when you sell it. If you buy a discounted cosmetically damaged good, you will also get get fair value for it... that is, fair market value minus the discount for the damage. However, reselling it becomes more complicated, because the future fair market value will be easy to determine, but the discount for the cosmetic damage will once again be up in the air. In other words, you cannot expect that future buyers of a scuffed item will value it in the same way that you do in the present, and as such, whether or not you will receive good value for it in the future is undetermined.

This intuitively makes sense, but the mechanical reason for why is because Craigslist is a market place for used goods, and not one for damaged goods. In essence, what you really need to do is to take the market for the item and separate out the sub-market for pristine used goods and the one for slightly damaged used goods. On any given day in the market place, there are more people looking at the nearly new compared to those looking through the scuff pile. And because you have a smaller market, you have more price uncertainty and things take longer to buy and sell.

Said another way... if you have the choice between more expensive and cosmetically perfect and less expensive and scuffed, it is worth thinking about going the more expensive route if you'd like to re-sell in the future.

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