I have never pawned anything, or even been in a pawn shop. But I sat with my kids while they burned away the hours watching a reality show on TruTV called Hardcore Pawn about a big Detroit pawn shop.
Why would anyone get cash in 2012 by pawning something when they could probably get more by selling it on Craigslist or eBay? Some people take loans, and a pawn shop is the only place to do that, but a lot of people just sell it outright or have no intention of ever paying back the loan. It looks to me like the pawn shop is taking a hefty cut and people are getting much less than the market value of their merchandise. Pawn shops seem so 1950s to me.
(BTW this show makes me think you’d have to be nuts to get into this business. You constantly have to disappoint people, even break their hearts, and there are plenty of loonies that walk in the door, plus you need some pretty burly security staff.)
Well you also get the item back from a pawn shop. You can pawn grandma’s engagement ring and go through the pawn process and pay the interest and still own it later on. Once it’s sold on ebay or craigslist, it’s gone.
Many people who use pawn shops use them like a bank. Bring an item in on the 15th, use the cash to pay the rent, get your SSDI check on the 1st, get your item out of pawn, repeat ad nauseum.
Like payday loan and check cashing places, these businesses take advantage of the stupid, the ones who lack foresight, the people who can’t manage their lives, and the truly desperate. There’s always a plentiful supply of such people.
Why would anybody pawn an item for much less than they could sell it on EBay? Why does anybody smoke? Why does anybody believe in God? Why does anybody get a tattoo? Homo not-all-that-sapiens isn’t a rational species.
One appeal of the pawnshop for the doofi (plural of doofus) is that they can fantasize about getting the pawned item back. And occasionally they do–paying the equivalent of 1800% annual interest in the process.
A pawnshop “reality show” is the absolute nadir of human expression and when the broadcasts reach deep space, the aliens will no doubt, appalled, send the extermination fleet.
The sign in the background of Pawn Stars shows that there is a 13% interest PER MONTH charge on all pawns. How is that not usurious?
After all, it’s a secured loan. If you don’t pay, the pawn shop keeps your stuff (and they loaned you a lowball amount to begin with) so they make out either way. 13% a month is absurd.
It’s actually usually much, much worse than that–there is a “fee” for writing the loan in the first place, and that fee is re-imposed if you choose to extend the loan. The amount is relatively small–$5 or $10—but it is charged regardless of the loan amount. So on a loan of $25 (about what a pawnshop would give you for the Hope Diamond) for 30 days, a $10 fee would add 480% APR to the cost of the loan.
Pawnshops and other businesses of their ilk instituted this practice a long time ago to evade usury laws.
If there weren’t already pawn shops in existence someone would have to create them. They provide a valuable service that the market needs, or they wouldn’t be around. They serve a purpose for those in society that need a little extra cash right now, and don’t really need their next to worthless doodad anymore.
What amazes me is how high the pawn shops sell goods that are forfeited by their clients. You sure won’t find a deal on a guitar at your neighborhood pawn shop. In fact the only thing dumber than pawing something at a pawn shop is buying something at a pawn shop.
Years ago, before credit cards, easy loan companies and the like, pawn shops were one of the few ways to raise money when you needed it in a hurry.
In other news, I wouldn’t put too much stock in Hardcore Pawn. It’s entertaining, but I seriously doubt it isn’t scripted. I can’t believe they can attract so many nutcases on such a regular basis.
Have you seen the cut that eBay and PayPal each take? The last time I sold something on eBay, it came out to about 25% in listing fees, photo fees, final value fees, credit/debit cart merchant feets, etc. Add to that the value of your time to wite up a listing, answer bidders’ questions, packing and shipping, and it’s not exactly non-hefty.
And Craigslist is a real crapshoot. Usually, your responses are 95% scammers, and of the 5% that are real people, better than half of them will be flakes and not respond to emails, or worse, not show up after making an appointment. In some areas, using Craigslist has become a significant risk of your getting robbed or shot.
If you just want to turn a thing into money, a pawnshop may just be the faster and easier way to go.
To sell on ebay, you have to be in good standing with Paypal. As a seller, I mean. One too many complaints - merited or not - and they freeze your account while they “investigate” and you can’t sell anything or use the funds already in your Paypal account in the meantime. They also, and quite often, freeze your funds just for the hell of it, even if there is no outstanding complaint or suspicion of fraud - and they don’t even NOTIFY you. You just go to use your Paypal Visa card to buy something and it’s declined; when you call them to see what’s up, they tell you there’s a hold that will be taken off sometime in the next 14 business days. Maybe. Because they’re not legally a bank, they don’t have to follow banking regulations set up to protect depositors.
To sell on Craigslist, you have to have what someone wants when they want it in the neighborhood they’re willing to buy from.
Shipping is another concern, too. It’s almost impossible to sell anything without free shipping these days, and shipping is not cheap. If I’ve got a $20 record to sell, I’m going to have to spend at least $5 for Priority Mail, not to mention the packing materials and box (because there’s no premade Priority Mail box big enough.) Parcel post is actually more. Media mail is less, but takes too long; you’re going to get shitty feedback or an outright complaint filed from your buyer, and then you end up with the aforementioned Paypal issues.
Plus, stuff just doesn’t sell on ebay like it once did. The market for “antiques and collectibles” is in the toilet right now. The market for Useful Things is more than filled by Walmart and Target and Amazon. ebay itself is quite open about wanting to encourage The Big Guys to sell there, and has done everything they can to hamstring the small seller, including manipulating search results so that small sellers end up on the 11th page where no one ever clicks.
We spent about two years of unpaid unemployment and disability appeals getting by selling our stuff. We’d post it on Craiglist first, then ebay, and when it didn’t sell, take it to the pawn shop. We took a lot of stuff to the pawn shop. Eventually, we learned our lesson, and just took stuff straight to the pawn shop. We sold less than $1000 worth of Stuff on ebay/Craigslist and paid over $300 on shipping costs over those two years. We actually made a much better percentage selling at the pawnshop, where the only cost of delivery was a bit of shoe leather to walk there, and no one could freeze our account.
Every once in a while it can work the other direction. I once got a condenser microphone very cheap at a pawn shop. It needed a battery. I’m sure the pawn shop owner didn’t know it took a battery and thought it didn’t work. But, yeah, usually they’re trying to charge too much to the unwary.
As for why people sell stuff to them, they still wind up receiving a lot of stolen merchandise, even with laws in place to try to prevent it, and with most pawn shop owners really wanting to avoid it. Your low level B&E burglar may head straight to the pawn shop to unload the crap they just took from your place after kicking in your door.
I tried to shop at a couple pawnshops and was amazed at the high prices they charged. No deals there that I saw. Some of the items I was looking at cost less new down at the local dept store!
I haven’t stepped inside a pawn shop in years, but aren’t the list prices high because they’re expecting you to haggle them down to a more reasonable price?