webwiz
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Post by webwiz on Aug 19, 2015 6:33:32 GMT
Are these loans to finance items which are being held by the shop, with the customer having the right to buy it back, or are they to finance items which have passed the buy back deadline and are now up for sale in the shop? Or a mixture?
What proportion of buy back items are actually bought back?
These are significant factors in assessing the risk, IMHO.
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Post by MoneyThing on Aug 19, 2015 8:22:01 GMT
Morning webwiz,
All Buy Backs contained within the Managed Portfolio's, contain assets hold by Cash Shop with the option for the customer to buy them back within the stated time frame. In the event that the assets are not redeemed, Cash Shop would then remove them from the Portfolio (as part of their commitment to MoneyThing), to dispose/retail them.
I will revert back as to the typical % of Buy Backs that are redeemed.
Kind regards,
Ed
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Post by MoneyThing on Aug 19, 2015 8:51:37 GMT
Morning webwiz, All Buy Backs contained within the Managed Portfolio's, contain assets hold by Cash Shop with the option for the customer to buy them back within the stated time frame. In the event that the assets are not redeemed, Cash Shop would then remove them from the Portfolio (as part of their commitment to MoneyThing), to dispose/retail them. I will revert back as to the typical % of Buy Backs that are redeemed. Kind regards, Ed Update: On average for Buy Backs, 70% of these are redeemed. Regards, Ed.
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webwiz
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Post by webwiz on Aug 19, 2015 9:49:42 GMT
Excellent.
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mv
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Post by mv on Aug 19, 2015 12:14:33 GMT
So would this be a fair analysis of the current situation?
1. People pawn their electronics with CS for around 50% or less of their resale value
2. 70% of them buy them back (at a significant APR/cost but less than replacing them or using a payday lender).
3. 30% abandon them to cover their their debt
4. MT (and it's lenders) generate capital for CS to maintain cashflow/liquidity against demand for their service for a cut of the profit.
5. CS has an obligation to buy-back from MT the 30% of items which the original owners did not buy back from them.
6. The revenue from the 70% of bought-back items + the re-sale of 30% not bought back, is sufficient to pay MT a %, it's lenders 12% and be profitable for CS too.
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coop
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Post by coop on Aug 19, 2015 12:24:01 GMT
I think you're broadly correct; I would only add that after step 2 or 3 the item is removed from the schedule of the loan and replaced with another buyback item(s) of equal loan value. And on step 4 I believe CS are using the money lent to them to finance an expansion rather than maintaining cashflow/liquidity.
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Post by MoneyThing on Aug 19, 2015 12:26:57 GMT
So would this be a fair analysis of the current situation? 1. People pawn their electronics with CS for around 50% or less of their resale value 2. 70% of them buy them back (at a significant APR/cost but less than replacing them or using a payday lender). 3. 30% abandon them to cover their their debt 4. MT (and it's lenders) generate capital for CS to maintain cashflow/liquidity against demand for their service for a cut of the profit. 5. CS has an obligation to buy-back from MT the 30% of items which the original owners did not buy back from them. 6. The revenue from the 70% of bought-back items + the re-sale of 30% not bought back, is sufficient to pay MT a %, it's lenders 12% and be profitable for CS too. I would concur that this is a fair analysis of the mechanics of this proposition. One other thing to mention is that all their customers are offered whether they wish to sell their electronics outright. (If these are purchased by Cash Shop then they are not used as part of the Managed Portfolio). Regards, Ed.
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pom
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Post by pom on Aug 19, 2015 17:40:02 GMT
6. The revenue from the 70% of bought-back items + the re-sale of 30% not bought back, is sufficient to pay MT a %, it's lenders 12% and be profitable for CS too. I had a look at the CS website recently - as I recall they didn't mention the interest rates they charge on buy-backs, but as for the straight pawn it was very obvious that there was plenty of scope to pay us & MT AND still make a good profit themselves
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Post by bracknellboy on Aug 19, 2015 21:13:13 GMT
... but as for the straight pawn it was very obvious that there was plenty of scope to pay us & MT AND still make a good profit themselves Personally I do find straight pawn more interesting than the other type, but I understand that both can be quite profitable.
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webwiz
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Post by webwiz on Aug 20, 2015 7:37:02 GMT
My assumption is that we can only lose money on a Buyback MP if CS go bust and their receivers cannot recover enough. Provided CS are solvent then there are no circumstances in which we can get stuck with any second hand electronics that we have to dispose of. Consequently the contents of the MP are of little interest to us.
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james
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Post by james on Aug 20, 2015 9:43:50 GMT
Well, we do have to consider the risk of either or both of CS and MT going bust so I wouldn't say it's sensible to disregard the security. After all, the security is there to protect against the bad cases. CS taking the initial risk is, of course, very welcome extra protection beyond that offered by the security.
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webwiz
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Post by webwiz on Aug 20, 2015 12:14:25 GMT
Yes, but a single MP is a drop in the ocean compared to CS's assets and however it performs is unlikely to affect their solvency. As I see it we are providing CS with working capital, not investing in any particular loan which might go wrong.
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