I’ve never sold anything in a pawn shop, but I was under the impression that they worked like this. I need money, so I take something with value, and sell it to the pawn shop. If someone else buys it, it’s gone, but if I can come up with the money to buy it back at slightly over what I sold it for before someone else does, then I bring in the ticket and get it back.
From looking at some state laws on pawn shops (so I was bored), though, it seems like there’s a little bit more to them then that. Is the pawn ticket actually some kind of loan, or what?
I don’t know much more about it than you, but yeah, it’s sort of a loan. Think about it: If you successfully pay and get your thing back, it ends up being like a loan, no?
You don’t really sell it to the shop, it’s more like collateral on the loan. The difference is that they have to hold the item for a while, to give you a chance to get it back. Once that time expires, you’ve defaulted and they can keep it and sell it.
I sold something to a pawn shop once in Illinois. The problem is they don’t give you crap for it. They want to make a big profit on it when they sell it. IMHO it’s better to sell your belongings on your own. I guess if you need the money right away though it’s your best bet, just don’t expect to get much for whatever it is your selling.
When you hock something, you’re giving it to the pawnshop as collateral on a loan (rule of thumb is to loan you 1/3 of what they can sell it for). They keep your item in the back room for whatever time they give you to pay back the loan (usually a month, usually can be renewed). If you make all your payments, you’ll get your item back. If you default on the loan, your item goes out on the floor to be sold.
Gunslinger’s description is correct. Pawnshops will sometimes also offer to just buy the merchandise from you up front, and place it out on the floor immediately.
I’ve bought things in pawnshops before. It can be a good deal if you’re really knowledgeable about the item you’re buying. The corollary is that if you DON’T know enough, you can get really stung. Prices can be way out of line in either direction. I got a fairly good quality condenser mike really cheap once. It needed a battery, and I don’t think the pawnshop owner knew it TOOK a battery, and thought it didn’t work (yeah, I know, if it were a really good quality mike it would run on “phantom power” off the connection - this was many years ago).
There is always the suspicion when buying from pawnshops that you’re buying stolen goods, too. Pawnshop owners generally avoid obviously hot or suspicious merchandise, and get lists from the cops, but I’m sure some slips through anyway.
Used to be a poster named “Userer” here who was a pawnbroker.
<OLD JOKE>
Boss to his secretary, trying to impress the waiting client: “Miss Phelps, would you please contact my broker.”
Sectretary, apparently ready to leave her job: “Would that be stock or pawn, sir?”
The loan you get from a Pawnshop will generally have the highest rate allowed by law, and the payment schedule will generally include paying the interest at least monthly, if not weekly. That means you might as well just consider it a sale.
The general run of “loan” customers for Pawnshops include people who have neither the resources, nor the inclination to conduct a sale of their property in a reasonable length of time. So, they grab what they can do without, and take what they can get. There are few alternatives for people without phones, addresses, or networks of people able to help with an orderly sale. Needless to say, banks and Loan companies offer even less chance.
The Pawnshop owner does much better if the owner pays his interest, and claims his property, eventually. If not, the owner is in the same position as any retailer, and limited to a selection of merchandise that someone already decided they can do without.
Tris
“Cabbage: A familiar kitchen-garden vegetable about as large and wise as a man’s head.” ~ Ambrose Bierce ~
Oh, and there are chain pawn shop operations, too. They can sometimes gain an advantage by having shops operating in several geographic regions - some types of merchandise may fetch higher prices or be in shorter supply on the second-hand market in a city other than the one it was acquired in.
I’m willing to bet that the advent of things like EBay has clobbered that advantage. Several years ago, there was a company with the symbol PAWN that ran pawnshops and traded on NASDAQ. They now seem to be a VERY small penny stock, traded over the counter.
At the pawn shop Mr. Winkie managed for a while, pawning or selling something required a photo ID. The store made a copy of your ID, took your thumbprint, and sent a copy of each transaction to the local police department. Not foolproof, but better than nothing.
When you pawn something, remember – the store is out to make as much money on you as possible if you default and they have to sell the item. While 1/3 is a rule of thumb, the person shooting you dollar amounts makes more money if he can get you to accept less.
Interesting - I had no idea howstuffworks did things like pawn shops, and it’s especially nice that they used NC as an example since I live there. I had always thought that pawned items immediately went out on the shelves.
Oh, and for the concerned types, I’m not looking at pawning off any valuables any time soon. In fact, I’m probably going to do some bargain hunting at pawn shops, which is what made me wonder about how they work.
I’ve been making use of pawnshops since I was 18. I’ve sold some hot stuff to one before, never had any trouble doing so but I’m not sure what would make it obviously hot - the golf clubs were probably a bit suspicious, considering I was 19 and had hair down to the middle of my back, got $60 for them.
When you pawn something, the pawnshop will give you some money (usually well less than half of what it’s worth, though sometimes the guy behind the counter has no real idea what something’s worth and will give more), and to get it back you have to pay a relatively large amount of interest, usually at least 20% per 30 days - and you will pay that 20% even if you come back later that week. The contract usually allows them to sell your stuff 90 or 120 days after it is hocked, but if you make a payment you can hold it off an extra 30 says for every 20% of the original loan amount you pay.
A lot of times you will find stuff very overpriced in pawn shops - video games are a bad example. I STILL see Sega Genesis cartridges with a $20 pricetag on them. You usually won’t get that good of a deal on that kind of stuff in a pawnshop - oh yeah, computers are bad too - I see pawnshops asking $100 for 10 year old 15" VGA monitors, and $600 for Pentium Is. I’ve also seen cheapo guitars overpriced - in fact, I saw one for sale in a pawnshop once for $10 more than it was for the exact same model new in the local music store. Inventory doesn’t seem to move very fast in pawn shops, but I’m pretty sure they get most of their income from the outlandish interest they charge.
Many pawnshops will give you better loans if you have a history of always getting your stuff back out. At a pawnshop I used to frequent in my old town, they wouldn’t loan me more than $25 for a Hondo electric guitar I had, but after pawning that same guitar several times that worked up to $50. Some things get better money, like brand-name acoustic guitars - I can get $100 for my wife’s Yamaha acoustic/electric, which cost me $550 new, but can’t get more than $60 for my multieffects processor, which cost over $750 new.
One thing I hate about pawnshops - they abuse guitars. I don’t think I’ve ever seen a properly strung classical acoustic guitar in a pawnshop - they almost always have metal strings on them, which have much more tension than the nylon ones you are supposed to use on such lightly built guitars, and the necks are always pulled out too far because of it.
States usually have ursury (sp) laws that prohibit charging too much loan interest per year. Some of those pawn shop examples seem to be charging too much yearly interest are they exempt from these laws?
Follow, the links, handy, follow the links. HowStuffWorks talks about this in their article, on this page:
A snippet: “What about the interest rate? In North Carolina, the maximum interest rate that a pawnshop can charge is 2 percent per month, or 24 percent per year. That’s about the same as some credit cards. However, a pawnshop can also tack on other charges, such as handling, appraisal, storage and insurance fees. The maximum allowed charge for these additional fees is 20 percent per month.” If you’re really interested in the legal issues, that page is a good start!
Some IMHO about pawnshops prices. I have a special interest in computers and electronics. Pawn shop prices in my region for these are unbelievably out of whack with reality (cf. Badzt Maru). I have no reason to believe that prices for other goods are any different. Ex. are old Radio Shack junk pieces for more than what Radio Shack charged new.
Look for little second hard stores (which also buy) or better yet yard sales. (E.g., a fairly new 4 head stereo Panasonic VCR for $5 that turned out to only need some cleaning. Today I sold an old pre-cable ready Zenith VCR for $5. What an upgrade.) Go to yard sales in “nice” neighborhoods. Those people have no idea what stuff is worth.
Note that pawn shop laws vary tremendously by jurisdiction. In Portland OR there is no loaning, it is all considered an outright sale.
I used to work in a pawn shop. We would try to buy price guides for stuff like guns and guitars. The managers and owners had worked with jewelry for a long time and knew their stuff. I kept an eye on electronic prices at nearby stores. Good pawnshops will have employees who know something about everything they sell.
When you see something with a high price, that usually means the store paid way too much for it in the first place and the owner didn’t make the interest payments, so the store owner is trying to recoup his losses. It’s par for the course.