Little classic for sale. Few careful owners, and sparkling performance. A bargain

The idea of buying someone a "used" gift may not sound attractive but in the case of jewellery it makes good sense - old items are often better than their modern counterparts, and hold their value far better, says John Andrew.

This may sound like another useful money saving tip from McDonald's, but have you ever considered giving second-hand jewellery as a Christmas gift, or indeed on any other occasion? By second-hand, I mean Victorian, Edwardian, Art Nouveau, Art Deco or signed pieces from the 1960s and 1970s. Put simply, second-hand jewellery is far better value than new.

The quality of old jewellery can be far superior to its modern counterpart. Despite modern technology, some of the old skills have been lost. For example, today's enamels just do not have the depth and richness of colour found on pieces made in the late Victorian or Edwardian eras. Also, techniques used in the past, such as granulation - which is the process of decorating a gold surface with tiny spherical gold grains - are no longer undertaken.

However, it is not just for reasons of quality that old jewellery can be a better buy than contemporary items. Brand new pieces attract VAT at 17.5 per cent. Pieces sold by most private individuals at auction are free of VAT. Most dealers in old and second-hand jewellery elect to pay VAT on their profit margin instead of charging buyers the tax on retail price, which is advantageous to the consumer.

There is another financial aspect which can make old jewellery financially more attractive. The cost of its manufacture has been absorbed by a previous generation. Brand new pieces retail at a price which covers manufacturing costs and provides a profit to the maker, wholesaler and retailer. The result is a retail price which is considerably above that at which the items sell on the secondary market.

Labour costs and other overheads are high in the jewellery sector. Furthermore, the jeweller's mark-up is the highest in the high street. This can be illustrated by a friend's recent experience. Tiring of a large ring purchased in the 1960s, she decided to enquire about the cost of making it into a brooch. The simple modification and fitting of a pin was estimated at pounds 550.

Brand new jewellery depreciates at a far greater rate than a new car being driven off a garage forecourt. Typically, a diamond ring which retails new at pounds 4,000 would realise around half that sum if immediately offered at auction. The depreciation for less expensive pieces is even greater, with items costing a few hundred pounds being very difficult to sell.

Of course, the object of making a gift of a new piece of jewellery is not for the recipient to sell it. However, many people believe that such a gift is an investment. Possibly they are justifying their extravagance by the comfort that it will increase in value. Invariably they will have a very long wait.

Although there is no guarantee that a piece of jewellery purchased on the secondary market will prove to be a good investment, there is a far greater chance of it retaining its value and a greater possibility of it increasing in value. When asked if jewellery was a good investment, David Warren of Christie's replied: "It depends what you pay."

So how do you go about buying jewellery on the secondary market? The advice of Anthea AG Antiques at Gray's antique centre in London is sound: "Go out and look and learn. The trade calls this `getting the eye'. It is simply training yourself to be able to recognise what is good. Go to auction views, visit antique centres and talk to dealers and auction house experts. Look at what is on offer, discover what appeals to you and compare prices." In other words, do your homework before you buy.

Make your purchases from people you can really trust. As there are many traps which can ensnare the unwary in the jewellery market, it does make sound sense to make your purchases from reputable sources. The larger auction houses all have experts who will willingly advise bidders. While the majority of dealers are reputable and knowledgeable, if you are spending a lot of money, it makes sense to buy from one who is a member of a trade organisation like Lapada.

"Buy only what you like," is the advice of Alexandra Rhodes of Sotheby's. Noting that buyers are now becoming more selective, she recommends purchasing quality items as pieces of good workmanship and style will be easier to sell in the future. Signed pieces by Cartier, Boucheron, Van Cleef and other international names are firm favourites with buyers.

Nevertheless, one does not have to buy the big names to obtain something which is good and gives you pleasure. if you want something to enjoy for ever, Anthea advises: "Go for something simple, but good as it will stand the test of time. The flamboyant and garish will have a short life in a world of changing fashions."