Why designer handbags may be worth it

I’ve always been pretty cheap when it comes to handbags. I don’t usually opt for leather (unless it’s heavily marked down — heavily) and I tend to pick price over substance, usually in the $30 to $40 range.

A couple of years ago I decided to splurge. I went out and spent $450 on a bag I’d been eyeing for weeks. And while it hurt a bit to pony up that much money for a purse, I haven’t regretted it for a second. It feels great toting my designer bag around and after two years of pretty heavy use it still looks pretty new. I’ve even done the math; After three years of heavy use, I am, in fact, getting my money’s worth.

Even though the initial spend was a wallet shock, the cost of the bag will work out to about 36 cents a wear over three years. Not bad… but is it really a good investment? After all, if I’d invested that $400 for the same three years with an average return of six percent I’d have $476.41 to show for it.

Apparently, that $76 return is chump change compared to what a Hong Kong company would loan me for a bag. Yes Lady Finance Co. now loans handbag owners 80 percent of their bag’s value. Tote your Gucci, Chanel, or Vuitton bag over to Yes Lady and you can qualify for a loan within 30 minutes of walking in the door. You get your bag back by repaying the loan at four percent monthly interest within four months.

According to this article in the Wall Street Journal, an Hermès Birkin bag recently garnered a US$20,600 loan but most loans start at about US$200. Of course, if you fail to pay back the loan, the company sells your bag. This is a far cry from the old days, where you backed up a loan with something substantial like your house or your car — in this case you can use your purse.

Of course it has to be investment-worthy with big designer brands like Gucci or Chanel. But the fact that you can use it as collateral for a loan makes me wonder whether or not shoes and sunglasses will be next. If you’re thinking of going out and buying your own investment purse, you might want to check out these tips from Golden Girl Finance about what to look for — that way if you end up in Hong Kong and short of cash, you’ll be set. Here’s what they recommend:

1. Choose from the big four: Gucci, Chanel, Hermès, Louis Vuitton.

2. Unleash the animal. The more exotic the skin, the more valuable the bag.

3. Be timeless. Skip the trendy seasonal colours and latest styles and go for the iconic, always-in-fashion classics.

4. Invest or speculate. On the other hand, we cannot fault a speculator who finds a gorgeous turquoise Miu Miu bag on sale and flips it a week later on eBay for three times what she paid. There is a place for short-term speculating and a place for long-term investing.

5. Go offline. Buy directly from the brand’s boutiques or a reputable retailer; somewhere you know will still be in business for decades to come when you may need advice on wear and tear.

Money expert Caroline Cakebread has been writing for Chatelaine.com since 2006. She is a recovering academic and the mother of two small kids. She lives in Toronto where she writes and reads about all things financial. Follow Caroline at Twitter.com/ccakebread.