Pawn shops have been around in one form or another for the past 3,000 years. They offer services similar to those of modern banking institutions including loans, consignments, and storage. A pawn broker has to wear several different hats including merchant, loan officer, banker, and even historian. A good pawn broker buys items for a reasonable price and sells them at a discount. The pawn industry is about making money, and that means repeat business and reasonable dealings.
Pawn shops are riddled with bad press and an even worse reputation thanks to Hollywood productions tying pawn shops to seedy neighborhoods and bad dealings. Fortunately, the reality of the pawn industry couldn’t be further from that.
A good pawn shop will carry a variety of items including jewelry, tools, antiques, furniture, knives, guns, crossbows, camping gear, and everything and anything you could imagine being of value and sellable. Some pawn shops even buy and sell cars, motorcycles, and aircraft. Yes, aircraft.
Here are five things you should know about pawn shops.
Pawn Shops Store Items Cheaply
Are you going out of town for an extended period and have a motorcycle, dirt bike, or other easily stolen large item you’d like to store somewhere that guarantees safety? Take it to a pawn shop. If you get a $500 loan from it, they’ll store it for the interest. A typical pawn shop will charge around 10% interest monthly. So, you’ll have that item stored for $50/month. If it’s stolen from the pawn shop, the broker is on the hook for it.
Pawn Shops Are the Oldest Form of Credit
By securing a loan from a pawn shop, you’re able to get the cash to make ends meet without having to apply through a bank.
Unlike banks, Pawn Shops don’t lend with obligation. You receive a fair price for your item, and have a reasonable amount of time to come back and claim it. The percentage rates are generally reasonable because repeat service is critical for the success of the store. You won’t be paying off a Pawn Shop loan for years like you would a credit card, but the interest rate is generally higher since it’s given on a monthly basis rather than yearly.
Pawn Shops Don’t Deal in Stolen Goods
Pawn shops are a heavily regulated businesses that (depending on your region) are in constant contact with law enforcement agencies. Every item pawned or sold is cataloged, IDs are checked, and the data is sent to local law enforcement. Items sold or left in pawn are held for a specific amount of time to enable law enforcement to do background checks and discover stolen items as they are reported. It’s only after that time ends will you find an item on the shelves.
If a pawn shop does purchase a stolen item, the police will seize it at a cost to the pawn shop which loses the money paid for the item and the item itself. The biggest loser in a stolen item transaction is the pawn shop. Pawn brokers are typically trained to read people and ask the right questions. If they suspect an item is stolen, the negotiation is over and the store will generally walk away from the deal and file a report with the police.
Pawn Shops Don’t Generally Rip People Off
This is a general rule, and as with everything there are a few seedy exceptions out there. Pawn shops rely on repeat business to make a profit. The goal of a broker is to make a profit in every transaction they have a hand in. If you’re trying to get a loan against your MacBook, PC, gold rings, or minifig collection, you’re likely to get a good offer from a Pawn Broker. At the very least, you should be able to haggle your way to an even better deal. The more money they can loan to you, the more they’ll get back in interest.
If you’re selling, things are a little different. Pawn brokers generally don’t want to buy unless what you have is pretty good. Computers drop in value considerably over a matter of months. Even if you have the biggest and best computer out there, the shop has to sit on it for a month or more before it hits the floor. During that time, it is no longer the biggest and best because something even better will have come out.
If you have a computer that’s a couple years old, forget about it. Pawn shops can’t give those things away. You’re better off going to eBay or Craigslist.
For items you are hoping to get a good deal on: negotiate. Negotiation is an important part of the pawn business, and you should never accept the first offer unless it exceeds your initial expectations. Remember though, pawn shops aren’t retail customers. They have to make money which means buying things for less than they’re worth retail. If that means putting money into it to make it more sellable, then they may need to do that. Just don’t be surprised if that cost is taken into consideration.
Things to Avoid Buying at a Pawn Shop
Computers, though not a big money maker for most pawn shops, are still sold on the floor as they come out of pawn. Computers are like cars, they may appear to work fine at first but you never know what issues are lurking under the cover. Pawn shops generally test everything they receive, but that doesn’t mean it’ll work for a week after it arrives in your home. The same can be said for vacuums, DVD players, Blu-ray players, and cameras.
That said, you would be surprised just how many good deals you can find at a pawn shop. Jewelry, tools, bicycles, movies, and other oddities can be easily purchased at a remarkable price. Usually, you’ll end up paying roughly half of what the item sold for retail.
Another thing to keep in mind is that pawn shops don’t just carry what you see on the showroom floor. Many of them sell products online or at auction where they know the chance of profit is much greater. Just because the showroom floor is fill of tools and bicycles doesn’t mean they aren’t willing to deal with high-end merchandise as well.
Pawn Shops get a bad reputation for being seedy places where desperate people sell off their goods to pay the rent. While they may offer loans to the desperate from time to time, the majority of the shops out there are actually very upstanding businesses that want nothing more than to make an honest living buying, selling, and making loans from goods. Shops are lending institutions, much like a bank. For the 30% or so people out there with no bank affiliation, pawn shops are a great way to get the money needed to purchase that next big thing for their home and/or person.