National Pawnbrokers Association Announces the Results of the 2010 Trend Survey
The National Pawnbrokers Association (NPA) today announced the results of NPA 2010 Trend Survey that assesses how the changes in the 2009 US economy affected the pawn industry. According to the survey, the average pawn loan amount increased to $100, nationally. This estimate is up from 2008, in which the average loan amount was $80.
“Pawn store customers on average are 36 years old and tend to borrow only what they need, as indicated by the average national loan amount,” said Dave Crume, president of the National Pawnbrokers Association. “The increase in the average pawn loan amount indicates that American families were seeking financial relief by turning to their local pawn broker.” Pawn
The survey also indicated that there was a slight increase in the number of defaults on pawn loans in 2009. Almost half of the pawnbrokers surveyed said that defaults on pawn loans increased an average of 8% in their pawnshops.
With the melt-down of the US economy, 2009 witnessed an unprecedented upswing in gold prices, which skyrocketed over $1,100 per ounce. This trend encouraged many US consumers to sell their gold and jewelry to local pawnshops rather than “fly by night” mail-based clearing houses advertised on television. Subsequently, cash-for-gold transactions were up by as much as 35%.
What may come as a surprise, however, is that business across the board did not increase at pawn shops as Americans sought safety net loans. Though the quantity and dollar amount of pawn loans and buy/sell transactions were up, pawnbrokers experienced a sharp decline in retail sales as cautious consumers cut back significantly on retail spending. Some Pawnbrokers saw decreases in their retail sales that were calculated up to 15%, with many business even higher.
“The pawn business model is complex,” added Dave Crume. “While many stores benefitted from the increased price of gold, there were also many shops that suffered from sluggish retail sales.” For example, as unemployed construction workers looked to pawn tools and equipment to make ends meet, pawnbrokers acquired a surplus of construction tools when the loans defaulted, which they couldn’t sell during the recession. When asked, an overwhelming 51% of pawnbrokers said the the downturn in the economy helped increase pawn loans, but hurt retail sales.
The forecast for 2010 was lukewarm. Pawn store owners believe that this year will bring a slight increase in pawn loans, but they are skeptical that the retail side will improve. “For years, pawn shops have been providing safety net loans to families that encounter sudden financial emergencies,” adds Crume. “These vital, small-dollar loans simply aren’t offered by banks and other traditional lending institutions. This year will be no different, but the industry will have to adjust to the new economic environment.”
