Moscow car pawnshops during the crisis

A tight personal financial situation pushes people to look for ways to get their hands on cash. One such option is putting up a car as collateral at a car pawnshop. Since the end of last year, interest in this kind of lending has grown by 15-20%.

Amid the crisis, as the number of car purchases falls, car dealers have increasingly turned their business into car pawnshops. Right now, car pawnshops are very well developed in Moscow, with around 30 of them operating.

A car pawnshop processes a loan in a short amount of time, and needs only a handful of documents: the car owner's passport and all the paperwork for the vehicle. Once the deal is finalised, the borrower receives an agreement stamped with the pawnshop's seal, and the client is given a report describing the car's condition and technical characteristics. The car stays at a guarded lot, from which the client can pick it up once the agreement's term ends, after repaying the loan amount and paying the interest.

To get a large loan amount at a car pawnshop, you can put up a foreign car no older than 8 years as collateral, while a domestically made car must be no more than 6 years old. The car also has to be liquid, meaning there's steady demand for it on the market — for a car like that you can get a loan of up to 70% of its price, while an illiquid car will only get you 50% of its value. The interest rate depends on how liquid the car is and on the individual terms of the particular car pawnshop; it can run from 5% to 8%, and the largest loan amount is 50-80% of the car's price. The loan term is set by the client, but the minimum term is 7 days and the maximum is 2 months. The term can be extended by one more grace month if the client doesn't manage to repay the loan on time. Only in that case are penalties applied.

Right now, the number of loans secured against cars is growing in Moscow. At the same time, the number of unpaid loans and overdue payments is also rising, since many borrowers ask for the largest loans possible. And it's not easy for a car pawnshop to sell a used car either, if the client fails to repay the debt. If the borrower turns out to be completely unable to repay the debt, the car becomes the pawnshop's property.

These days, amid the crisis, the cars most often put up as collateral are Audi and Mercedes, since people buy these cars purely for the looks. And if the loan goes unpaid, they part with the car without much difficulty. A Toyota is very rarely left as collateral, since a car like that is usually owned by a practical person, for whom it won't be easy to part with it. Car pawnshops are becoming steadily more popular during the crisis, and are used by businessmen who put up expensive cars as collateral in order to get a larger loan.

Amid the crisis, many Moscow car pawnshops are making concessions to clients: they accept not only cars but other vehicles as collateral too. And thanks to growing competition, many pawnshops offer their clients various discounts.