Comments on: Ever Wonder How a Pawn (Pawn Shop) Works?

By: Matt SF

Matt SF — Tue, 15 Sep 2009 15:15:36 +0000

@ Bobby,

Makes sense. Plus would give some wiggle room for making a small profit since the pawn broker can just resell the item. Thanks for commenting.

By: Bobby

Bobby — Tue, 15 Sep 2009 15:05:14 +0000

It is my understanding that a pawn loan is a non-recourse loan, which means the borrower is under no obligation to repay the loan. Therefore the pawnbroker would be an idiot if they were to loan the full value of the item. In that case, there would be no incentive for the borrower to get their item back. Even banks only lend 80% of the value of collateral, and with a bank, you MUST repay the loan or they will come after you.

By: Matt SF

Matt SF — Sat, 12 Sep 2009 18:51:13 +0000

@ Pawnonomics,

Thanks for commenting. As I mentioned, I know next to nothing about pawnbroking, but the show does intrigue me. I wasn’t insinuating a negative by “making money on the desperation factor” considering that is a basic component of supply and demand, but simply referring to the increase in pawn shop business (at least according to CNBC commentary I’ve seen) in relation to the recession.

By: Pawnonomics

Pawnonomics — Sat, 12 Sep 2009 18:44:27 +0000

Actually, pawnbroking is the oldest form of consumer credit dating back nearly 5000 years. Reality television does very little to reflect the true reality of this important source of short-term consumer credit.

By: Matt SF

Matt SF — Sat, 12 Sep 2009 14:00:45 +0000

@ NDP

They really haven’t focused on the back end of their money making transactions, however, I’m fairly certain they get a healthy markup. The lead guy is always saying “I’m buying at wholesale, and selling on retail”, so that’s probably a 20% to 50% markup at least.

I believe you’re correct on the loan to value idea as well. There have been instances where people will pawn a car/bike, get the loan, and come back within a few weeks to reclaim their property. One guy pawned a bike, got a low ball offer, and I hope for his sake, he came back to repay the loan (plus 10% interest) because his bike was worth way more than the loan he took.

Seems like another well conceived way of making money on the desperation factor.

By: No Debt Plan

No Debt Plan — Sat, 12 Sep 2009 04:48:47 +0000

Very interesting. Nothing like collateral to cover the loan! Have they mentioned during the show how they then sell the pawned/sold to them items? Is it all walk-in business or eBay or…?

Just curious as to what kind of margins they earn on that end of the business. Obviously 10% per month loans are nice and I’m sure they don’t give 100% loans (e.g. I pawn my car for $8000 I’m guessing they give me a loan for $6,500 or something like that).