How to Get a Better Deal when Buying from Pawnshops
Let’s say you walk into a pawnshop to check out whether there are any gold, silver or platinum items there for sale – items that you can buy for low prices. Or you walk into a coin dealer to see what’s on display.
Let’s also say that you find what seems to be a good deal. It’s a South African Kruggerand that contains 1 Troy Ounce of gold. When you ask the dealer the price, he replies, “$1,505.00, because we sell at current trading prices.” So you go online, check trading prices, and decide that you will be getting a fair deal if you buy that Kruggerand for the asking price. So you go back to the pawnshop or coin dealer, pay asking price, and assume that everything has gone well.
But Did You Get a Good Deal?
Well, it could be. But because buying a gold coin is not like buying a box of cereal, other considerations could apply. You might, in fact, have paid too much, for reasons you didn’t know.
Here is some information you should understand.
The Trading Price Is Not Necessarily the Price You Should Pay
The fact that the price on the London Fix for a Troy Ounce of gold is $1505.90 doesn’t mean that you are required to pay that much for a gold coin that contains that much gold. You can, in fact, make a lower offer – within reason.
The real price that coins sell for is the “fair market price” which is another way of saying, the amount that the seller is willing to accept for what he is selling. You can offer less than the asking price, and the seller is either going to say yes or no. And if he says no, you can try to bargain and arrive at a mutually acceptable price which might still be lower than the current trading price.
A bit of perspective: If you are in a pawnshop, you can be pretty sure that the person who pawned that gold coin didn’t get paid the full gold trading price for it. The pawnbroker paid less and is now selling it for more. That is how a pawnbroker makes money.
You Can and Should Ask to Have Seller’s Fees Waived
Let’s say, for example, that a coin dealer accepts your offer of $1,545.00 for that bright, shiny Kruggerand. He wraps it up and then hands you a bill for $2,008.50. Why What happened?
Well, sales tax could be part of the difference. But when you ask, the dealer tells you that his store charges a 30% seller’s fee. Whoa! Where did that come from? You ask and the seller says that charging a seller’s fee is “standard practice.”
The fact that it is standard practice for them doesn’t mean it is standard practice for you! Just because the seller wants to tack on an extra $463.50 doesn’t mean that you have to pay it. (Who says you are required to pay it?) You can simply ask the seller to waive the fee. Depending on a variety of factors, like the amount of time the seller has had the coin and the seller’s need for cash, he will probably wave that fee. And if he refuses to do so, you can leave and buy a Krugerrand somewhere else. Though they are beautiful, they are not rare.
Again, Know that the Published Price Is Not the Price the Seller Will Accept
This point is related to the first one we made above (“The Trading Price Is Not Necessarily the Price You Should Pay”). You see, many coin dealers, pawnshops and other sellers have determined an unpublished price they will accept, but which they won’t tell you about.
Where does this secret price come from? It falls somewhere between the price that dealer is willing to pay for a similar item (an asking price) and the amount of money the dealer would ideally hope to sell it for (a bidding price).
In other words, if the dealer bought that Krugerrand for $1,000.00 from someone who was desperate to sell it and hopes to sell it to you for $1,545.00, the “real” price the seller has in mind falls somewhere in between those two sums. He might be thinking, say, $1,400.00, but he will never tell you that. How do you find out the lowest price you can pay? You find out by bargaining.
What happens if you are not able to arrive at a price that is mutually acceptable? You simply walk away, without feeling too bad. The seller will probably try to sell the coin to someone else at a price that is closer to what he wanted.
Sounds Complicated?
Actually, it isn’t. It’s all kind of like buying a used car. The seller has a selling price in mind, and you have a buying price in mind. If you can agree on a price that is between those two figures, you have a deal.
But other factors do come into play when you are dealing with precious metals like gold, silver, and platinum. If you need some expert advice, call Specialty Metals Smelters and Refiners at 800-426-2344. Our advisors are available to answer all your questions about trading precious metals profitably.