What is a CPO Rolex?
It's a Certified Pre-Owned Rolex, a secondhand watch that has been certified by Rolex to be authentic in all its parts.
Rolex created this program so the company could profit from the expanding market for secondhand luxury watches, but the certification of pre-owned watches could also be useful to insurers as well as consumers.
A new Rolex purchased from an authorized Rolex dealer comes with specific descriptions of each part and it carries the manufacturer's warrantee. An insurer would want these papers as part of the submission. The purchase price of the watch reflects its value in the current market.
But when it comes to secondhand watches, it's a wild west scene. Maybe the pre-owned watch came from a pawn shop, a flea market, an online auction, even a website that sells Rolexes though the seller is not an authorized Rolex dealer. The watch's description may not be accurate. The papers received by the original purchaser may be lacking. The appraisal may be boilerplate or it could have been done by an appraiser inexperienced with watches. With such a watch, the insurer—or the careful consumer—faces two important issues: Is the watch a genuine Rolex or a fake? And: What is it worth?
Steamroller crushing counterfeit Rolexes
1. Fake Rolexes
Rolex is the largest luxury watch brand. So, unsurprisingly, it is by far the most counterfeited. One estimate is that the total number of faux Rolex watches produced every year is 10 times the number made in Rolex's facilities. Some are cheap knockoffs, but some are so well done that only a Rolex dealer can recognize them as fake. And Rolex considers a watch counterfeit if it has any non-Rolex parts.
Even a high purchase price does not guarantee an authentic Rolex. Paying $20,000 for a $50,000 watch may seem like a great deal, but hallmarks can be forged. Authentic visible parts may conceal a movement that was cobbled together. Those diamonds may be CZ, and the gold may actually be gold plate over a cheaper metal.
Such fakery thrives in the new watch market as well as in the secondary market. It's worth noting that Rolex considers any watch not purchased from an authorized dealer to be secondhand, even if it's never been worn. If it comes without official papers from an authorized dealer, how do you know it's genuine? The average gemologist appraiser does not have the expertise to determine whether a luxury watch is genuine in all its parts.
2. Valuation
Determining the value of a pre-owned watch requires a knowledge of the secondary market for vintage watches, and the ability to determine the value of the particular watch in question. In the past, insurers and insureds looking for valuation on a vintage watch had little recourse beyond the word of the retailer.
One consumer, seeking an appraisal of their vintage Rolex from the company, received the response that "Rolex does not sell or appraise previously owned watches." As the replacement cost of the watch in question, Rolex gave the price of the current model. Unfortunately, this has been common practice.
Replacing old with new works for jewelry but not for watches. Watches are machines, subject to depreciation. A luxury watch has a complex mechanism, and parts wear out. Also, new watches, like new cars, have improvements over last year's model. Other than exceptional collector's items, it's a rare watch—or car—that holds its value or gains in value over the years. Replacing an old watch with a new one means Moral Hazard!
CPO - Certified pre-owned
Under Rolex's CPO program, participating Rolex Jewelers are authorized to buy Rolexes that are at least three years old and then send them to Rolex for certification. Rolex inspects the watch, verifies that it is genuine in all its parts, refurbishes it, and returns it to the retailer. Each such watch is accompanied by a seal (shown at top of this page), a two-year international guarantee card, a service booklet and a guarantee booklet.
The Rolex Jeweler sets the selling price for the watch. CPO Rolexes are likely be higher priced than similar pre-owned models that have not been certified by the company.
Retailers may supply their own certificates for watches they sell.Some retailers buy and sell pre-owned watches and supply their own certificates authenticating the watches they sell. And some outlets offer no such written assurances of authenticity. It's up to the consumer to judge whether knowing the genuineness of the watch is worth the higher price.
Some smaller luxury brands already have CPO programs, and other large brands are expected to follow Rolex's lead. The CPO program benefits the watch manufacturer by bringing in additional revenue from the growing market in pre-owned watches. People who are looking to purchase high-end watches, especially collectors, are assured that a CPO watch is genuine. And insurers, too, can be assured that the high-end watch is not a counterfeit.
In previous issues of JII we have discussed some of the concerns around insuring a Rolex, the most popular luxury watch. For more detailed discussion of things insurers should think about when considering coverage for a Rolex, see here, here, here, and here.
Even though a luxury watch costs as much as a car, watches have no equivalent to an auto's VIN number, identifying it by model, year, etc. Each part of the watch contributes to its value, and all parts should be separately described on the appraisal.
Any gems on the watch, and the metal of each watch part, should be described in the same detail as for any other piece of gem jewelry. As you can imagine, detailed reporting on a watch encrusted with gems is extremely important to insurers.
The market in counterfeit Rolexes is immense, immensely profitable, and worldwide. Always ask for warrantee papers and a sales receipt, especially for luxury watches that came from a seller other an authorized dealer in the brand.
Be mindful of the moral hazard of an excessively high valuation, which can cause the insured to try to come out ahead by "losing" the jewelry.
"Vintage" and "estate" are terms for used watches and other jewelry. They do not signify quality; they just mean the jewelry isn't new.
Secondhand Rolexes can be authenticated at an official Rolex Service Center or by an Authorized Rolex Dealer.
The sales receipt is important evidence. If the seller is not an authorized dealer, the watch may be counterfeit.
Seek a replacement for a luxury watch only from an authorized dealer in that brand. Do not be tempted to shop in the huge market that exists for watches with unauthorized, aftermarket add-ons. Such modified watches are not considered genuine.
Watches, like cars (and unlike other jewelry), are machines that suffer wear and tear and do depreciate over time. A 10-year-old Rolex does not have the value of a new Rolex of that model. As with a car, so with a watch—the replacement should take into account the age and condition of the property.
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