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Why Are Guitars So Freaking Expensive?

It might be hard to swallow, but the reality is that they’re probably cheaper than they should be

As you’ve probably noticed, just like with toilet paper, all the gear for hobbies you can do from home is hard to find during a pandemic. Nintendo Switches? Gone. Baking yeast? Gone. Bicycles? Hard to find. Guitars? Even as brick and mortar music stores suffer, the instruments have been flying off those darkened shelves, man. People are working on their creative selves in all sorts of ways in 2020 — and a lot of people have decided now’s the time to either get into guitar or dive deeper into it. 

But if you’re new to music, the first thing you probably asked yourself is, why are guitars so expensive? Alongside Josh Augustin, a second-generation independent guitar store owner and a former regional manager for Guitar Center, we figured it all out for you, guitar faces on the whole time.

Well, they’re not all expensive, are they?

That’s true, brochacho. A new entry-level guitar will generally be in the $200 to $300 range (or at least under $500, let’s say) — that’s amazing for a musical instrument! But here’s the thing: Entry-level guitars have remained in the $200 to $300 range for several decades, even as the cost of materials has obviously increased. 

How’s this work? Because that’s generally what the guitar-buying consumer expects, the industry has to find a way to make it happen. Augustin describes the guitar industry as one with a lot of ingrained assumptions, as you’ll find out. And so, in order to hit that price point, the production has gotten cheaper and the materials less high quality.

Let’s start with the production. Lower-cost guitars have been made overseas for years: on assembly lines in Mexico, Japan, Indonesia, South Korea and China. Augustin says that for a while, Chinese guitars were of exceptionally poor quality and practically unplayable — they’d break, go out of tune, you’d cut your hand on a fret. Now, however, the quality has vastly improved to where a $200 guitar today is of the same or better quality as a guitar that cost $200 a couple of decades ago. And today, he says, roughly 80 percent of all guitars are made in China. 

As to the materials? Guitar makers have had to get creative, because not only have the prices of exotic woods increased, but they’re harder to obtain due to over-harvesting (mostly by the furniture industry, Augstin points out, which is far larger than the guitar industry). So, for example, cheap guitars use sapele or walnut for a tone wood instead of mahogany, or Richlite for the fretboard instead of ebony.

“The industry is still very set on price point,” Augustin says. “No matter what, the consumer still believes a guitar costs $200, so the industry has to come up with a solution to make sure that they can offer a guitar with the right amount of playability — so it stays in tune, it’s not going to be a piece of junk, and it’s going to cost $200 to $300.”

What about more expensive guitars?

Those are almost all going to be made in America. This is a vastly different process, Augustin explains. The American-made series of Fenders, Gibsons, Martins, etc. are made more by hand rather than on an assembly line like they are overseas, by skilled luthiers who have been at the factory for several decades, and on the same machines that have been cranking guitars out since 1950. An American-made guitar means you’re also getting an acoustic or electric guitar that uses decent materials instead of substitutes: solid rosewood, solid mahogany, sitka or alpine spruce, maple. But you’re also paying the true cost of labor and materials; American-made guitars start at $1,000 to $2,000 and often cost a whole lot more, depending on the components or how customized you want it.

All of this is important, because American-made guitars are almost a different class. The perception of heritage is a big factor in the guitar market, and an American-made Fender is seen as a “real” Fender, being made in the Fender factory in California rather than on an assembly line at an original design manufacturer in Asia, literally alongside dozens of other brands, as the $200 to $300 guitars are (even the ones that say Fender or Gibson — or rather, their entry-level name brands).

Augustin compares American-made guitars’ brand perception to Harley-Davidson or Coca-Cola: They’re legacy brands that stand for something, and therefore, the ones made in America are most desirable.

Does it really matter, though?

You mean beyond the fact that they’re skillfully hand-built by people earning a fair wage and feature better materials? Yes, because there’s something else: The value. Augustin says American-made guitars (usually at the “standard” level and above) will hold their value over time, and perhaps even increase. Because they’re more desirable and seen as authentic, in the future, people will be seeking them out, no matter how worn and used they are.

Thus, American-made guitars are a decent investment that, unlike most things besides real estate or art, actually hold their value over time. Which is pretty cool, considering you don’t need to keep it in the case — you can play the hell out of it for decades until then, and people might actually want it even more for its distress and patina, much like a pair of old Levi’s.

Doesn’t guitar buying involve haggling?

It used to — Augustin says that’s gone away, thanks to the internet. Guitar stores used to be somewhat like car dealerships: No deal was ever the same, and it was all done off of negotiation. You know: “If I could get you that deal right now, how would you feel about it?” “Let me go talk to my manager,” etc. 

Here’s how it worked: There was a list price that was public and then, Augustin says, the seller would negotiate down from there, knowing where their margin lay. So for a $1,999 guitar, Augustin says, “We’d say, ‘Yeah, I’ll do that for $1,400.’ So the customer’s walking out of the store feeling like a star, thinking he’s got this $600 deal. In reality, we were going to sell that guitar for $1,400 — that was the price of the guitar.”

The internet, however, has brought much more transparency to things, and so, what’s now called the manufacturer’s advertised price is what you’ll find everywhere — big-box stores, independent stores, Amazon. It chopped all the workable margin out of the business and then some; thus, nowadays, what you see on the sticker is what you’ll pay. This bums out some of the older customers who get frustrated that they no longer can wheel-and-deal their way to a $600 discount, but according to Augustin, with such tight margins now, it’s actually a better price than what they were paying before, all told — and he personally appreciates the greater transparency.

So if guitar buyers expect certain guitars to cost a certain price, will they stay that way forever?

Augustin doesn’t think so. “Every year, the cost of making the guitars goes up, and the actual price of the guitars doesn’t go up that much,” he says. “People always feel that an American Standard Strat should be around 1,200 to 1,300 bucks. That’s kind of where it sits. But as the cost of goods go up, five years from now you might be looking at it costing $2,000. And how’s the customer going to react to that?” 

Not very well, probably. Augustin believes prices will have to increase gradually in order for customers not to rebel, but that might happen sooner than we all think. COVID has really disrupted the guitar supply chain and, just like the aforementioned bicycles or Nintendo Switches, Augustin says if you can find a guitar right now, it was made pre-pandemic, and he predicts that its current price is a bit better than you’ll find on a guitar later this year, once factories are back to fully running.

But overall with guitars, you… kinda get what you pay for?

Yes — the good thing about a market that’s been fixated on price points for so long is that you tend to get your money’s worth no matter how much you’re spending. A cheap guitar nowadays plays well for the price, whereas an expensive one is made with what seems like a vanishing standard of craftsmanship, and will likely hold its value long into the future. Because no matter how good you are at air guitar, still nothing beats a real, American-made one.