I almost hate answering this question but it is one of those unfortunate misunderstandings that I will typically hear about pawn shops.
For whatever reason it is a lot of people just assume that pawnshops will rip you off. That actually could not be any less true.
Yes, pawn shops are out to make a profit on the items that they taken in, however it is not a gross amount of profit, or one that is way out of line with what other businesses mark up items.
The fact of the matter is that a lot of people don’t realize what the used market place for most merchandise actually looks like and how much their items might actually be worth if they were to try to resell them.
All most people really think about is how much they paid for something when it was new and just coming out of the store – which is not really reflective of the used marketplace for merchandise unfortunately.
You can get an idea of what an item may sell for in used condition with similar completeness to yours just by looking on eBay.com. Be sure to look at the “Used” and “Sold” listings and not the buy-it-now’s or the new items.
EBay is a live marketplace for used merchandise just like yours, and very well may be the place of the pawnshop turns around and resells your item should you forfeit it.
To Be Clear Let’S Go Over Some Of The Things That May Cost A Pawn Shop Money When They Are Selling An Item
The first thing that you have to be aware of is that the pawn shop will accrue any interest and storage cost into the cost of an item that you have made a loan on but later forfeit.
That is to say that whatever the pawn shop paid you for your item plus any of the unpaid interest that built up on the loan before the item forfeit will then become a part of the cost of the item.
For example if the pawnshop loaned you $50 on an item and it accrued $26 of past-due interest when it was forfeit, the cost of the item for the pawn shop would be $76 in total.
Above and beyond that the pawn shop will end up having to pay an employee to clean or otherwise prepare your item for sale. Beyond basic cleaning that could also mean things such as repair.
If your item is damaged or is otherwise missing parts required to easily resell the item, the pawn shop will have to replace those items or repair them.
Repairs can become costly in some circumstances. However what is most likely going to be the largest cost will end up being the replacement of any items that may be missing; for instance people almost never bring in the the chargers with their items.
So once you take the total cost of the loan plus interest and added to repairs or replacement parts you now have an estimated cost for the item for the pawn shop – which is normally going to be at least 50% higher than whatever they loaned you on it.
Selling Items Isn’t Free For Pawn Shops
As many more pawnshops are selling items online these days, the pawn shop is also going to have to pay an employee to sit there and photograph item, list item for sale, answer any follow-up questions the item receives, as well is later package and ship the item.
Needless to say none of this is free. In addition to the packaging process, while the buyer will often pay shipping they typically do not pay for the cost of the packaging materials.
This means things like the box used to package the item, any bubble-wrap that may have been involved, tape to seal the box, and finally a shipping label holder of some sort will all have to be purchased and paid for by the pawn shop as a cost of that sale.
Above and beyond those expenses, sites like eBay and Amazon both charge fee’s for selling items on their sties – typically around 10% or maybe a little less. That also get’s calculated as being a pat of the cost of a sale.
So How Much Is It The Pawn Shops Actually Make On The Items They Take In And Resell
So with all that having been said a pawn shop will typically pay between 40% and 60% of an items estimated resale value on a site like eBay.
Another 25-40% will be consumed in the items of final cost, repair, or labor cost involved with the resale of that item.
What this ultimately means is that he pawnshop stands to profit between 10 and 20% of any sale of any item that may forfeit, or that they have bought outright.
So with that in mind a pawn shop really isn’t ripping you off that bad at all. They were only making a very modest profit margin on the resale of the items.
So Why Do People Think That Pawn Shops Rip You Off
With all of this in mind, you’ve got to keep in mind that people think that pawn shop rip them off because all that they know are what the items sold for when they were new.
Somebody will probably pretty easily remember how much they paid for an item when they bought it in the store, in it’s sealed box, with a warranty, etc.
What it is that most people don’t take into account is what an item will really been worth, out of it’s box, with a few months or years of use, collecting dust, and generally aging as newer items come out with better features and nicer designs.
It’s this discrepancy between their item’s new price and the current price for it when you attempt to sell it on a used marketplace that really throws people off it seems.
Then on top of it a pawn shop will only pay a percentage of that used value because in the end, they still have to make a little profit for themselves – they are a business after all.
Ultimately though, pawn shops aren’t out there ripping people off. That’s just not true and not the case at all.
WordPress junkie, music lover, and consumer of all things pizza-oriented. I’ve run pawn shops and check cashing operations for years. I developed the most successful digital marketing marketing strategy for pawn shops known to date, and flip items on eBay for fun.