Diamond rings, Cartier watches, and Saks Fifth Avenue fur coats have become common collateral for loans at pawnshops.
More (formerly) wealthly customers – driving up to the lending establishments in BMWs and Mercedes-Benzs – are looking to exchange luxury belongings for fast cash.
Some pawnshop owners have lent 30% to 40% more money this year, and the number of first-timers has increased by 10%. Recently, one of the once well-to-do customers pawned his Movado Fiero watch with a diamond bezel for $2,500 to pay off his montly mortgage. Another hoped to get $9,000 for her fur coat to buy private-school uniforms for her child.
Typically, pawnshop customers have a household income of about $29,000, according to Dave Adelman, president of the 2,400-member National Pawnbrokers Association. But operators around the country say they are seeing a surge in new activity fuelled in part by a different clientele: middle- and upper-middle-class customers facing ravaged stock portfolios, tightened bank credit and unexpected layoffs. In areas dogged by high unemployment and foreclosure rates, the pawn business is especially robust.
But pawnshops will not take just any gadget or expensive item, the rich are willing to part with.
“On a recent weekday morning, a line stretched from the front counter at Lewiston Pawn Shop. Mr. LaChappelle and his Lewiston, Maine, staff turned away many customers with less-than-desirable goods. Computers, because they become obsolete so quickly, are among the items that are hard to use as collateral. Other things such as porcelain figurines and collectibles have negligible loan value since there’s a limited market to resell them if necessary.
“I try to take all I can but I also have to be aware of the market,” explained Mr. LaChappelle. “We have to evolve with the economy or I get stuck with merchandise that doesn’t sell.”