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Bottom Line Recommendation:
Lab-created diamonds generally don’t retain value well, as the supply of lab-created diamonds is increasing rapidly and affecting values. This means that if you purchase a lab-created stone, you’ll generally only get pennies on the dollar if you ever decide to sell it.
In comparison, although a naturally created diamond will cost more, you can expect it to retain about half of its retail price over the long term if you buy from a reputable online vendor.
Despite this, a lab-created diamond may be worth considering if you’re on a budget and don’t care about resale value. Lab-created diamonds are around 25% to 60% cheaper to buy than naturally created diamonds, meaning you’ll likely save a fair amount on your purchase.
If you do decide to buy a lab-created diamond, we recommend buying from a reputable online diamond vendor such as James Allen. Their prices are highly competitive, they offer a diverse range of engagement ring settings and their service is some of the best in the industry.
If you’ve searched for information about diamonds online, you’ve almost certainly come across news articles or blog posts on lab-created diamonds.
Lab-created diamonds, or lab-grown diamonds, are man-made diamonds that are created — as you would expect from their name — in a lab setting.
From a customer’s perspective, lab-created diamonds offer some advantages, including a lower purchase price. However, they generally don’t retain their value well, meaning your diamond will likely be worth significantly less than its purchase price if you decide to sell it in the future.
Below, we’ve explained how lab-created diamonds are developed, how they differ from naturally created diamonds, as well as the basics of how lab-created and natural diamonds are valued on the open market.
We’ve also explained why lab-created diamonds are valued differently from natural diamonds, both when they’re sold new and on the secondary market.
Finally, we’ve explained when a lab-created diamond could be an option worth considering for an engagement ring or other diamond jewelry.
Before we get into the financial side of lab-created diamonds, it’s important to cover the basics of how lab-created and natural diamonds differ from each other.
Like natural diamonds, lab-created diamonds consist of carbon atoms. Chemically, a diamond produced in a lab is virtually identical to one created in nature. Likewise, lab-created diamonds display the same aesthetic characteristics as those produced naturally underground.
This means that to the naked eye, there’s no visual difference between a diamond created in a lab and one created naturally beneath the earth’s surface. Put two diamonds side by side — one lab-created and one natural — and they’ll look identical in just about any environment.
Scientists produce lab-created diamonds using machines that apply a combination of extreme pressure and heat to small pieces of natural diamond. The process is rapid, taking less than a month to create a typical diamond.
In comparison, natural diamonds can take billions of years to develop under the surface of the earth.
Due to the shorter time and lower cost involved in producing diamonds in a lab, a lab-created diamond will generally cost less than a natural one. In our experience, a lab-created diamond will usually be around 25 to 60 percent cheaper than a natural one.
Beyond the difference in how the diamonds are produced and the amount of time the process takes, there are several other key differences between lab-created and natural diamonds:
From a financial perspective, the key difference between a lab-created diamond and a natural diamond is value retention.
When explaining value, it’s helpful to remember Warren Buffett’s famous quote: “Price is what you pay, value is what you get.”
Lab-created diamonds are cheaper than natural diamonds at the time of purchase. When you look solely at the purchase price, a lab-created diamond will often look like a better deal than a natural diamond.
However, over the long term, the difference in price becomes less significant and the difference in value becomes more significant.
Natural diamonds are valuable for several reasons. First, they’re immensely desirable. Although lab-created diamonds are growing in popularity, most diamond buyers are happy to pay a small premium for a stone that was created naturally.
Second, although natural diamonds aren’t hugely rare inside the earth, they’re significantly rarer than lab-created diamonds. There’s a limit to how many diamonds can be mined, whereas there is theoretically no limit to the number of diamonds that can be produced in a lab setting.
These factors, as well as several others, all have an effect on the respective resale values of lab diamonds and natural ones.
As we’ve covered in our guide to diamond resale value, diamonds don’t retain value particularly well, at least when they’re purchased from a retail store. If you buy a natural diamond at the full retail price, you can expect to get between 20 to 60 percent of this back if you decide to sell it.
Generally, diamonds bought from brick-and-mortar stores will have the highest markup and, as such, may sell for closer to 20 percent of what they originally cost. Natural diamonds purchased online will have a lower markup and may sell for closer to 50 or 60 percent.
However, lab-created diamonds retain an even smaller percentage of their price, meaning you’ll lose a larger percentage if you ever decide to sell your diamond.
This is where the price vs. value difference becomes clear. For example, let’s say you purchase this lab-created 1.13 carat, ideal cut, F color, VS2 clarity diamond for $2,000. If you ever decide to sell it, most jewelers won’t be interested in purchasing it back from you.
If you ever sell the diamond, it’s unlikely that a diamond buyer will pay more than a few hundred dollars — a small fraction of what it cost originally.
In comparison, if you buy a natural diamond from an online vendor such as James Allen or Blue Nile, you’ll generally be able to get 50 to 60 percent of its original price back should you decide to sell it in the future.
This is simply the nature of the market for lab-created diamonds. Since they’re readily available and easy to produce, the open market simply doesn’t value them as highly as natural diamonds, which are significantly rarer and have a large yet still finite natural supply.
After reading this, you may be thinking something along the lines of the following: If a diamond can be created to exact chemical and aesthetic perfection in a laboratory, how can a naturally produced diamond command such a high value?
This is a common question, and it’s one we’re happy to answer.
As we’ve explained before, although we think diamond jewelry is beautiful and an engagement ring undoubtedly holds a special significance, we’re not big believers in much of the advertising that’s put out by the diamond industry.
In particular, we strongly advise against following popular ideas like spending two months’ worth of your salary on a diamond ring — a purely commercial “guideline” that started with a De Beers advertising campaign.
We also don’t believe that the amount you spend on a diamond has any bearing on how strong your love for your partner is, or how motivated they’ll feel to get married. Love is love, and there is no specific dollar figure or carat weight that’s necessary for a successful engagement.
However, we do believe that a natural diamond has value beyond that offered by a lab-created diamond for several reasons:
Ultimately, every diamond buyer has different priorities. If the factors above are important to you, a natural diamond will be the better choice. If they’re not important to you, you might prefer to go for the lower cost of a lab-created diamond over the better long-term value of a natural one.
Overall, lab-created diamonds are less expensive than natural diamonds. However, they’re also significantly less valuable, meaning you’ll lose a much larger percentage of what you paid if you ever decide to sell the diamond in the future.
This is something that you should be prepared for if you’re planning to buy an engagement ring or other jewelry that features lab-created diamonds.
Although we generally recommend buying a natural diamond, buying a lab-created diamond is an option that you might want to consider if you’re more concerned about the initial price you’ll pay than the amount of value the diamond will retain over time.
If you think that natural diamonds are overpriced, or if you admire and appreciate the science behind a lab-created diamond more than the wonder behind a natural one, there’s absolutely nothing wrong with buying a lab-created stone if that’s your preference.
If you decide to go the lab-created route, we highly recommend buying from a reputable online vendor such as James Allen. You can also learn more about the buying process and what you should look for in our detailed guide to lab-created diamonds.
You can also learn more about what to look for in a diamond in our guide to buying a diamond, which covers everything from cut and shape to color, clarity, carat weight, comparing different diamonds and more.
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