And that's where you're completely wrong and don't understand the business model. It's a common misconception. You're confusing a pawn shop with a second-hand dealer rather than a financing operation. It's exactly the same business as an investment bank, main street bank or credit card operation. They're all the same business model on a continuum that rates on the credit quality of their customers. The lack of knowledge about Pawn shops is common with middle-class folk - and understandable, as a poor person would probably not have the faintest idea on how to lease a Lexus either.

Pawn shops work on interest payments. The pawned item is just the security on the loan. They're after the interest payments, not the physical goods. This is doubly so in the world of Walmart, where just about anything can be bought cheaply, new.

The ideal customer for a pawn shop is someone who regularly pawns something, pays 25% interest per month on a regular basis, and comes back and pays the loan and has their item returned to them. It's not unusual for pawn shops to have regular customers who pawn some family heirloom every year to pay for christmas presents or car registrations, then pays the loan back, and does the same thing next year.

The items for sale in a pawn shop are the result of failed loans. The storage area 'out the back' is the arena of the performing loans. If the display stock is larger than the stored stock, it shows the pawn shop is doing badly because they are making bad loans and having to sell a lot of old stuff.

The actual business of selling the used stuff is just to (a) bring people into the store so they can get new customers and (b) dispose of the items that have been given up by customers, to recoup the capital to make new loans. It's not the main profit centre at all. The reason you get 25% LTV rate on your old TV is because the pawn shop knows you're a credit risk (otherwise, why would you be there), the TV set might be busted and they cannot possibly maintain a good knowledge on the market price of all pawned items, so they give a conservatively low estimate of the value so there is a chance of at least recouping the capital if the load goes bad : ie, the person does not pay it back.

The analogy is that Banks would rather foreclose on a house and sell it rather than collect 30 years worth of interest payments. That's patently not true. While that might be the hypothesis of someone who has just had their house foreclosed, from the point of the view of the bank, they just want their interest payments and want nothing to do with the icky business of courts, keys and irate customers. The very last thing a bank wants is to own houses. That's why they'll do many things to try and get your loan performing again before doing the foreclosure. The unmistakeable sign of a failing bank is one that owns a lot of foreclosed property.

The very same applies to Pawn shops. The quality of their loan book is the key to their business, not the quality of the merchandise in the glass cases.

Again, I think the pawn business is a nasty business but these people fill a need in society, and the regular customers are surprisingly well informed on what a good deal is, and what isn't.