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Why Pawn Offers Vary From Shop To Shop-At Common Exchange, we love fielding our clients’ questions regarding the inner-workings of the pawn industry. One of them, which we hear quite often, has do to with the difference in pawn offers from shop to shop. Since the answer is a bit involved, we thought it deserved a data-driven blog post of its very own. Here goes:

portrait-of-a-confused-woman.jpgIn 2014, a group of researchers took four items (an iPad, a violin, a diamond ring, and a gold ring) to eight different pawn shops, each located within a small geographical radius in a major American city. What they discovered was fascinating: pawn loan offers vary a lot, even for relatively common items. For example, the iPad fetched an offer of $50 at one shop while five other brokers offered between $100-$150. Even more notable, the diamond ring received offers ranging from $65 all the way up to $1060, while four of the brokers made no offer at all.

These results prompted the team to dig deeper, so they also analyzed a large sample of data from online pawn sites. Their earlier, in-person experiences were largely confirmed: the average pawn offer on a single item differed by over 250% from lowest to highest. They also realized that certain types of items were subject to consistently larger offer discrepancies, with jewelry, antiques, and precious metals having the largest average spread (a 300% – 475% variability). Even video game consoles, which had the most consistent range of offers, still had a significant 50% spread from lowest to highest.

So what explains the large difference in pawn loan offers? The researchers have three explanations. First, pawn shops often specialize in certain types of items. This may be because the broker has a certain interest or knowledge of a given product, or that shop may be particularly adept at moving that type of merchandise. Because of this, these stores often make the highest offers on their items of specialization. Conversely, specialization may also explain particularly low offers, as shops are less willing to make offers on items that don’t interest them or they may have difficulty reselling.

Another factor is the difference between each shop’s target profit margin. For instance, shops with lower operating expenses or higher client volume can afford to make more generous offers than shops that are less busy or have higher overhead.

Access to capital, or cash, is the final proposed explanation for the wide variance in offers. A pawn shop may be self-funded or have investors, but every pawn broker is limited by how much money they have on-hand to lend. So, if a shop has already lent out most of its available cash reserves, they may be more selective about which items they make large offers on, or whether they will make an offer at all.

Now that you’re an expert on pawn offers, if you’re shopping for top dollar on your next loan, come see us first at any of our eight BC locations.