Buying and Flipping: the Art of Pawn Shop Negotiations

Imagine this: you walk into the local pawn shop and find that special guitar you’ve been dreaming of adding to your collection. You haven’t just been dreaming about it, you’ve researched every review and combed through every forum post, and know exactly what you want. And here it is, hanging on the wall in a pawn shop. The thing is, it’s the wrong color. You’ve always hated greenburst guitars and that's not going to stop now. But you still know the guitar's specs and value, and know you could easily flip it for a quick buck on Reverb.

You look at the clerk and comment on how you think it’s a nice guitar, but the price is a little steep. The clerk says, “Make me an offer.” You freeze; you don’t want to offer too little and end negotiations on the spot, but you also don’t want to offer too much and see this smirk on her face as she accepts your offer (calculating how much profit has just been made on you and your rich-dude offer). You don’t want to let your excitement for finding that almost-perfect guitar overpower your willful sensibility towards gear purchases (as if any of us actually have that).

It's an easy scenario to avoid if you take the time to understand what the clerk might be considering when deciding to accept or decline your offer. Take a look at the tips below from someone who is intimately familiar with the pawn shop process, and walk into your next buy with an added dose of negotiating power.

First, if the piece of gear is something you know to be incredibly rare or if the price is less than what you know the instrument is worth by a significant margin, then don’t waste too much time working them over. Because in the process of negotiating, the shop may do some more investigating on Reverb, eBay or one of the subscription pricing services they use, and they’ll realize it’s underpriced or that they didn’t identify the year/model correctly. At that point your negotiating position is lost anyway, and the moment you walk out the door, they will increase the price or list it online.

Secondly, if you can live without it, don’t be afraid to walk away. This is why: If you are working with a small pawnshop, they may have $1,000 tied up in a guitar hanging on the wall, and while it’s for sale that money isn’t being loaned out at a high interest rate. Think about it: a small shop only has so much money to use. Either they lend out cash in exchange for merchandise, which is how your pretty guitar got into their hands, or they have it tied up in gear that the previous owner has forfeited. Some shops charge as much as 20% per month. That’s right-- if your guitar was pawned for $1,000, you may have to pay $200 every month just to keep it from going out on the sales floor. It doesn’t take many months for that loan (and the pawn shop’s profits) to double. They don’t like to admit it, but the pawn shop would rather that customers keep their items in hock than have to put them up for sale where the profit margin is likely less than 50%. Three months of interest payments is equal to most profits from a sale anyway. Sure, the pawn shop needs inventory, but it needs customers paying interest on their prized possessions just as much, if not more.

So this brings us to the guitar sitting on the counter as you negotiate with the clerk or if it's a pricier item, the store manager or owner. If that guitar doesn’t sell, then they aren’t getting any return on that $1,000. A guitar that sits for six months in inventory means that they are missing out on an additional $1,200 of interest payments ($200/mo. x 6 mo.), and presumably, that money could be better used loaned out to other customers. For this reason, the longer that an item sits on the sales floor, the greater the shop’s willingness to negotiate.

One of the first questions you should ask is, “how long have you had it?” Don’t expect a straight answer; this is just a cavalier reminder to them of the fact that it’s not making them any money hanging on the wall. Sometimes, the price tag will have a date that indicates when it was forfeited by the owner. You may have to decipher a little code, but if you can get some sort of indication that this piece is ripe for moving out of the store, you are in a stronger position to negotiate.

Unless both parties know that something is grossly overpriced, offering 50% of the asking price will be offensive. I would suggest offering somewhere in the neighborhood of 60-70% of the asking price and expect to “split the difference” at 75-90%. You will do some back and forth, but be prepared to hit a bottom-dollar where they won’t budge. If you are comfortable with paying their bottom dollar, then ask, “out the door?” This means with tax included in your offer. Sometimes that’s a way for the shop to move a little more on price, and you can save some money for new strings and guitar polish. Of course, if you’ve gotten to the point where the other side is digging their heels in the sand, then “out the door” is not going to be helpful.

Remember: cash talks. The shop has to pay a percentage on every credit card transaction, and when they loan out money, it's in the form of cash. This puts most shops in need of cash for a couple of reasons. If you are offering $300 for an item, it never hurts to say something glib like, “I have three bills for this right now.” This implies that you are willing to pay $300 with tax included. From their perspective, it’s awfully tempting to add some money back into the till.

Once you’ve gotten that greenburst beast home, polish it up, throw on some new strings, take proper photos and spend some time writing up a detailed description as you post it on Reverb. You probably already know what it’s worth, but if you have any doubts, it never hurts to run some comparables on Reverb, the Reverb Price Guide or completed listings on eBay. Sometimes, even green-burst guitars can demand a premium.

Once you've gotten your first flip on the books, you'll likely be hankering for another. You'll spend your off days checking out thrift stores and pawn shops, searching for underpriced MIM Strats and SM-57. If you learn how to spot gear in the wild, and keep your negotiating game strong, finding something locally, and presenting it to a global audience on Reverb can quickly turn from a weekend hobby to a legitimate supplemental income stream.

Many of us have had successes and failures in these types of negotiations, and plenty of us have bought something to flip only to have it sit in our closet for months and years with not a single bite from a buyer. Use the comment section below to tell us what works, what doesn’t work, or maybe just a good story you have.

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