Pawnshops are cashing in

[Liberal_in_LA]

http://www.latimes.com/business/la-fi-pawn25-2008dec25,0,4228591.story

Pawnshops are cashing in

The stores are seeing a rise in customers as more financially strapped people seek quick loans.

By David Pierson
9:15 PM PST, December 24, 2008

Reggie Pendleton was laid off last week and needed money to buy his wife and two young children Christmas gifts. So he turned to an increasingly popular option in this deepening recession -- a pawnshop.

On Tuesday, the former technology firm recruiter walked into Collateral Lender Inc. in Beverly Hills clutching a stainless-steel Rolex he had bought in better times for $3,300.

After an inspection by one of the store's appraisers, Pendleton was offered a $400 loan. He can buy back the timepiece within 4 1/2 months at a monthly interest rate of 18%.

Pendleton, 43, was hoping for more money, but a holiday without presents was unthinkable. So the Culver City father took the cash and headed for the mall to buy toys and jewelry for his family. "This will be the toughest Christmas," he said.

----------------------

Traditional lenders have seized up, and people of all walks of life are handing over their diamonds, purses and golf clubs to make their next mortgage payment or, in some cases, pay their employees for the holiday season, pawnshop workers say.

"This whole period now is nuts," said Tal Shmargal, owner of Collateral Lender. "We have people taking loans just to keep their business afloat."

It's a trend that's been reported nationally as the nation's economy continues its downward spiral.

[TechBear_Seattle]

1. Can anyone explain to me how this is NOT a depression?

I work in the financial sector (granted, in information technology) and I can't understand why people who should know better keep cooing about things are really not so bad.

[Donnachaidh]

2. I had some Goober salesguy at BestBuy try to claim the economy was fine

Because he had run out of the CHEAP laptops (the tiny acer ascribes that are the rage at $300). Of course, he had three endcaps and a table filled with the regular sized laptops that he hadn't moved, because people just don't have the cash.

It was sad shopping tonight. Last year, Xmas eve shopping was insane, people everywhere, carrying out big ticket items by the bucketloads. Tonight - just a bunch of people milling around looking at things, but NOT buying. You could literally walk to the front of the store and find OPEN checkout counters. On Christmas EVE. :wow: :wow: :wow:

[Tangerine LaBamba]

5. Of course it's a depression

The "commentators" aren't saying it, that's all, because they're afraid people will flip out.

As if we had the energy.

Just like Fuckface calls white black, so do these people think that calling it something will make it that thing.

Nominal linguistics just don't cut it.

We're in a depression. My parents married during the last Depression. I cannot believe that I'm seeing this in my lifetime.

[Incitatus]

35. Because they are not personally affected.

Ask them again if they lose their job.

[jeff30997]

3. What ?

No happy ending ???

Fuck you !!!

(Of course this is a satirical post so if you don't get it then I will

have to be nice to my less intelligent DUer friends and post this:

:sarcasm:

[Lorien]

4. Geez, $400 for a $3,300 Rolex?

eBay would have been a much, much better move.

Worse than pawnshops are those awful payday advance outfits (like Amscot). Yet another way to screw to poor into greater poverty!

[Tunkamerica]

6. well on ebay you can't get the watch back a month later for $472

either.

[Liberal_in_LA]

7. Most likely someone who has been laid off won't buy the watch back in a month so ebay

still would have been a better deal. He might have been able to sell it for $1000 or more.

[Tunkamerica]

8. I'm just saying why it seems like a better deal to get a loan

because if things pick up next week then nothing is gone, you're only down a hundred bucks or so.

The reality is different and pawn shops make a killing in times like these, or rather after times like these.

[John Q. Citizen]

19. Unless deflation sets in. Then their stuff drops in value by the day.

[Statistical]

25. In that case the person could opt for no pawn contract.

In otherwords sell not pawn and get about twice as much.

Obviosuly the person in the story believed the could buy it back in the next couple months... maybe they are in denial but it was their choice.

Pawnshops (at least in VA) offer a pawn or outright sell.

Pawn has a contract (usually 1 - 5 months) in which you have the right to buy it back.
The longer the contract the less the pawnshop gives in face value.

So they may have offered something like:
$800 to sell (no chance to buy back)
$480 for 1 mo pawn
$440 for 2 mo pawn
$400 for 4 mo pawn

[Statistical]

23. Not that I am a friend of pawnshops BUT...

pawnshops offers two services:

Pawn. You get a lower % of the retail. In this case $400. In return the pawnshop CAN NOT sell the item (or they owe you full retail as a penalty) for x numbers of months (in this case 4). It is essentially a loan w/ the item as collateral.

Sell. You generally get about 2x-3x as much as the pawn rate but you are selling the item (like ebay).

So comparing $400 to ebay isn't exactly apples to apples.

More like $800 - $1200 pawnshop sell rate to ebay.
Also selling a Rolex on ebay could be difficult.

Would you buy a "GENUINE (I SWEAR) ROLEX" from an anonymous source, online? Only $999 was $3200.

[Lorien]

29. Well, if he wants it back that's another matter. I got the feeling that he

just wanted the money. As an eBay seller myself with a 100% approval rating, anyone will buy with confidence from me. The same is true of many of those "we'll sell it for you on eBay" outfits; you really *can* trust that it's genuine. I would expect that something like that would sell for around $1,800.00 on eBay-maybe more if a bidding war got underway.

[Selatius]

9. A holiday without presents is unthinkable? We've had several holidays without presents in my world.

What world are some of these people living in?

In my world, all we have are the company of close and fun friends and family. That's enough reason to live for the next fucking day. Start looking at what you do got and stop looking at what you don't got.

I know that poverty sucks, but Jesus H. Christ, how detached have some people become from what is really important in this world???

[LeftyMom]

10. The world where not long ago it seemed reasonable to spend 4K on a watch.

:shrug:

[ima_sinnic]

11. I sooo agree--my 1st thoughts exactly--

all he did was exchange 1 bauble for several more than will be useless, forgotten junk before very long. If he can't buy presents now, he should be watching his assets, like that watch. He might need to convert it to food one day soon. Instead of showering his family with "things" they can't afford, he could have taught the virtues of belt-tightening ("austerity," my father would call it) and the joy of simple family togetherness and homemade presents, if any are "needed."

[trof]

14. Emotions take over. We spent our last $30 one year

on toys for our little girl.
Oh we had the rest of the bills covered, barely.
But that $30 was the last of our so-called 'disposable' income until the next pay day.

[The Backlash Cometh]

12. How do these things work?

If someone goes into the Pawn shop and sees the Rolex watch before the time is up, can he buy the merchandise and own it?

[mnhtnbb]

13. Yes. We're seeing ads on TV from local pawnshops. Those who still have money

to buy can get some very good deals buying jewelry at pawnshops. BUT, you really have to know
your jewelry. Caveat emptor.

[8 track mind]

16. you can also score great deals on tools

I bought my A/C gauges, automotive brake tools, and some machinist tools at various pawn shops.

[Statistical]

24. Or guns. But once again you need to know the value of stuff (n/t)

[jmowreader]

17. It depends on the state

In North Carolina all pawnshops have to maintain an area out of view of the customers to hold items that are still in the "Pawn" stage of their stay at the shop. When the pawn contract ends, they are allowed to move items into the view of the public, but while the contract is still valid they can't.

[The Backlash Cometh]

27. That's cool.

So, you can buy it back with a little interest?

[jmowreader]

32. Yes, that's the supposed intent

They'd prefer you DID come down and buy it back, because shit tends to stay in pawnshops for years.

Which reminds me...I need a short telephoto lens for a photo project I'm getting ready to start, and I'll look in pawn shops tomorrow for one. Nikon lenses are fairly cheap around here.

[Statistical]

26. No.

When you give something to a pawnshop it is either an outright sale (think ebay) or a pawn.

Long version:
A pawn is contract between the item holder and the pawnshop.

The pawnshop gives money up front and holds the item as collateral. It is a loan.
IF the owner doesn't repay the loan then the pawnshop keeps the collateral.

Either way the pawnshop wins. Either the loan is repaid w/ interest OR the person decides/can't repay it and the pawnshop sells the item.

The penalty to pawnshop for selling an item under pawn contract varies but in VA it is fair maket value of the item plus 10%.

Long time (middle ages) I pawned a pair of handgun. They were new worth about $900 or so (both). Pawn shop gave me a 3 mo pawn contract @ 19% and $300.
So I got from pawnshop about $300ish
I had to repay the $300ish plus about $120 interest within 90 days or the guns belonged to the pawnshop.
(Some pawn shops only offer a 30 day pawn say $20 in interest and it can be "renewed" like a payday loan by just paying off the "vig" - interest each month).

Two months later I had the cash. I went to pickup my guns and ONE HAD BEEN SOLD. The pawnshop said it was a mistake.
They had a similar item that had dropped out of pawn and they moved it to the front.

They offered to give me the "other guys" gun. I said NO. My gun was well kept and I have no idea what care the other owner had.
Imagine taking your car in for service and they accidentally give your car to someone else but offer to let you keep their car!

Anyways I knew they had defaulted on the pawn contract and owed me $$$. The clerk said no I said I would see them in small claims court.
I paid the pawn back collected my one weapon and had clerk mark on the pawn ticket that other item hadn't been returned.

Next day owner called and wanted to "resolve this like men". He paid price of new handgun of that make & model + 10%.

Short Version:
No store can NOT pawn an item under contract. If they do they are subject to a penalty that depends on state law.

[The Backlash Cometh]

28. Thanks for the info! Important to know in these times.

[MadMaddie]

30. The Pawn shop won't put that particular item out for display

until the allotted time is up. If the owner doesn't pay the monthly fees then the owner loses the property.

[Rabrrrrrr]

15. So he thinks giving his family the gift of an 18% per month loan is better than nothing.

Our culture needs an enema.

[formercia]

18. Don't sell Gold or other precious metals to a pawn shop

They discount steeply, sometimes over 50%

There are honest refiners that will pay up to 98% of spot for Gold.

[Lochloosa]

20. Legalized Thieves.

I have never patronized a pawn shop.

I have gone to them to retrieve tools that were stolen from me. Twice.

[tuckessee]

21. It's kinda hard to feel sorry for a clown that owns a Rolex.

I'll reserve that for guys who have to pawn things like their tools or family heirlooms.

[WillieW]

22. He got ripped of by the pawn shop.

[Telly Savalas]

31. He ripped himself off by spending over three grand on a watch in the first place.

I spent less than that on my car.

[WillieW]

33. Apparently, he had the cash way back and wanted a Rolex - so what?

[Telly Savalas]

34. It seems he didn't have that much cash if he's now having to pawn the watch.

The guy is only a victim of the pawnshop, because he made himself a victim.

Anybody with the good fortune of having enough available cash to plonk three grand on a watch ought to have the common sense to know to have a decent sized emergency fund before making such a frivolous purchase.

[madamesilverspurs]

36. Pawn shops

are now accompanied by payday loan stores and rent-to-own businesses. The numbers of such alternative banking entities increase as the economy sours. Although all three can be predatory, pawn shops actually have a slightly higher degree of "respectability." For a time, the rent-to-owns were virtually unregulated as they weren't subject to retailing constraints; the rules are tightening somewhat on the payday loan stores. All three have become staples of what has become known as the poverty industry.

[Liberal_in_LA]

37. I never understood the attraction of 'rent to own'. why not buy a bedset from Goodwill?

I can't imagine that even poor, financially uneducated people would get suckered in by 'rent to own'.

[LeftyMom]

38. They lie pretty blatantly about the terms.

I posted a few years back about a customer who came into the (real, not RTO) electronics shop I was working at comparison shopping the camcorder she was about to own. The rent to own shop had told her it was worth $800, and that after all the payments it was going to cost her about $1200.

We had that exact model on sale for $269 every few weeks, it was $299 when not on sale. It was the cheapest model we sold at the time, and they were going to charge her as much as our most expensive model ran.

Back then we still did layaway, so we found her a slightly nicer model that actually did what she wanted, and she took it home after a month of prompt weekly payments. She was young and I had a feeling it was the first nice thing she'd ever bought for herself, she looked really proud when she made the final payment and took it home. I was pretty proud of her, even though she was a complete stranger really, for saving up and making an informed buying decision rather than getting suckered in by sketchy salespeople and a desire for instant gratification.

I do think rental shops would be useful if they were geared toward people who only need an item for a vacation or party or something, rather than for overcharging those who can least afford to pay extra for things.

[Liberal_in_LA]

39. $800 vs $299. That's robbery! RTO, payday loan, tax advance places take advantage of the poor.

Tax advance (H&R block) ads have started airing in Los Angeles. They charge a huge fee to advance taxes a few weeks.

[LeftyMom]

40. Here too.

I guess people don't realize that if you efile and do direct deposit you'll get your money in just over a week.