PFANDO advertises a straightforward promise: get cash at short notice, with no SCHUFA credit check, and continue driving your own vehicle. This is made possible through a sale-and-rent-back model. The customer sells their vehicle and immediately rents it back.

At first glance, this may look like financing. Legally, however, it is something different.

That distinction lies at the heart of the model.

Overview: What Does PFANDO Offer?

PFANDO describes its service as an alternative to a loan and to a traditional car pawnshop. According to the company, the vehicle is inspected and the customer then receives an offer to purchase it. If the customer accepts, the purchase price is paid out. At the same time, a rental agreement is concluded so that the customer can continue using the vehicle.

The basic process is simple:

The customer brings in their vehicle.

The vehicle is valued.

The customer sells the vehicle.

The purchase price is paid out.

The customer rents the vehicle back and continues driving it.

The crucial point lies between steps three and five: by selling the vehicle, the customer gives up ownership. The customer continues to possess and use the vehicle, but the company becomes its owner.

The vehicle is therefore not merely used as collateral for a loan. It is actually sold.

The Issue: Liquidity in Exchange for Ownership

The service is aimed at individuals and businesses that need money at short notice while still relying on their vehicle. That combination is precisely what makes the model attractive: an asset is converted into cash without the customer immediately losing their mobility.

But it is also what makes the model require careful explanation.

With a loan, the customer receives money and must repay it. With a traditional pledge, the customer generally remains the owner of the pledged item. Under a sale-and-rent-back arrangement, however, the customer sells the vehicle outright. The ongoing payments are not loan instalments. They are rent for a vehicle the customer no longer owns.

The economic effect may still feel similar to the customer: they receive immediate liquidity and then make regular payments. Legally, however, the customer's impression is not decisive. What matters are the purchase agreement, the rental agreement and the transfer of ownership.

Before signing, the customer should therefore not ask only:

How much money will I receive?

The more important questions are:

What is the vehicle's market value?

What is the actual purchase price?

How high are the rental payments?

How long does the rental agreement run?

Under what conditions does the agreement end?

Is there any guaranteed option to buy the vehicle back?

What happens if payments are missed?

Only by considering all of these points together can the customer's true financial burden be determined.

Why the Model Is Generally Not Considered Lending

The legal starting point is the separation between the sale and the rental agreement.

Under the purchase agreement, the vehicle is transferred in exchange for payment of the purchase price. There is no obligation to repay that purchase price at a later date. Under the rental agreement, the former owner pays to continue using the vehicle.

Without an obligation to repay the purchase price, the arrangement is not automatically considered a loan under German law. According to the regulatory assessment examined in the report, this is precisely why the model does not automatically fall under BaFin's ongoing supervision of lending activities. BaFin is Germany's Federal Financial Supervisory Authority.

That does not mean that every such agreement is beyond challenge.

It means only that the model is not subject to the same general financial regulatory authorisation as a conventional credit product. Disputes are primarily examined under civil law. The specific agreement, the relationship between the values exchanged and the circumstances of the individual case then become decisive.

What the German Federal Court of Justice Decided

On 16 November 2022, the German Federal Court of Justice (Bundesgerichtshof, or BGH) considered combined purchase and rental agreements used in sale-and-rent-back arrangements in several cases.

Its conclusions were nuanced.

The BGH found that the contractual model under review did not constitute a prohibited repurchase transaction under Section 34(4) of the German Trade Regulation Act (Gewerbeordnung). The reason was that the customers had not been granted a contractual right to repurchase their vehicles. A sale followed by a rental arrangement does not become a prohibited repurchase transaction merely because its economic effect resembles a pawn transaction.

That finding did not, however, automatically make the agreements legally valid.

In case VIII ZR 436/21, the BGH upheld the assessment that the purchase agreement was a transaction akin to usury and was therefore void as contrary to public policy under Section 138(1) of the German Civil Code (Bürgerliches Gesetzbuch, or BGB). The decisive factors were the striking imbalance between the values exchanged and the further circumstances of the specific case. In the other proceedings, the judgments were overturned and the cases were remitted for further examination. Among other issues, the lower courts were instructed to determine whether those cases also involved transactions akin to usury or fraudulent misrepresentation.

The judgments therefore do not state:

Sale and rent back is generally prohibited.

But neither do they state:

Sale and rent back is generally unproblematic.

The individual agreement is what matters.

The Corporate Structure Behind the Business

The report The PFANDO System analyses publicly available annual financial statements and corporate registry data relating to several companies. According to the report, the various functions within the German structure at the time were distributed among different legal entities.

Four levels must be distinguished:

ownership of the vehicles;

rental of the vehicles to customers;

operational activities involving branches, staff and customer contact; and

the shareholding and holding-company level.

This type of division is not unusual under corporate law. It separates assets, contractual relationships, operations and liability risks.

For customers, however, this internal structure is barely visible. They experience a single transaction: sell the vehicle, receive the money and continue driving the vehicle. Behind that transaction, several companies and contractual relationships may be involved.

This is precisely why the identity of the specific contractual partner matters. Who purchases the vehicle? Who rents it to the customer? To whom are payments made? Who is responsible when the agreement ends or a dispute arises?

The brand may present a uniform image to the outside world. Legal responsibility does not necessarily follow the same structure.

What Happens If Rental Payments Are Missed?

After the sale, the vehicle no longer belongs to the customer. If the customer is unable or unwilling to continue paying the agreed rent, this is not simply a case of financing coming to an end. It concerns the return of a vehicle to its owner.

That is a fundamental difference.

There is no need to seize the vehicle because it is no longer part of the customer's assets. This does not, however, mean that the owner may recover the vehicle by any means it chooses. A tenant or other person in possession of an item also has legal protection of that possession. Depending on the circumstances, recovering the vehicle may therefore be unlawful if it occurs without a valid legal basis or constitutes unlawful interference with possession.

Here too, the individual case is decisive: the contractual terms, termination of the agreement, the possession situation and what actually happened.

For customers, this means that the rules governing missed payments and the return of the vehicle should not be treated as fine print to be read later. They are among the key issues to consider before entering into the agreement.

The Economic Logic

The business model does not generate revenue solely through the later sale of a vehicle. Its core lies in the vehicle's ongoing use.

The company acquires an asset. The former owner then pays to continue using it. Recurring income is generated for as long as the rental agreement remains in force. Once it ends, the vehicle can be recovered, used again or sold.

The annual financial statements examined in the report must therefore not be viewed in isolation. Vehicle inventories, operating revenue, rental income and the value of shareholdings are recorded at different levels. Only when considered together do they reveal the economic logic of the structure.

The model does not depend on quickly reselling an individual vehicle. It depends on separating ownership from use – and on the recurring payments generated by that separation.

Switzerland as a Comparison

The third edition of the report also examines how the model has been implemented in Switzerland. This section is based on journalistic reporting connected with the SRF consumer programme Kassensturz Espresso. According to that reporting, an economically comparable model is said to have been implemented there using a simpler contractual and corporate structure.

This section of the report is expressly intended as a comparison of the systems involved. It does not claim to provide a conclusive assessment of individual Swiss agreements.

The comparison nevertheless illustrates an important principle: a business model adapts to the legal jurisdiction in which it operates. Its economic core may remain the same even though the companies, agreements and responsibilities are structured differently.

Summary

PFANDO offers liquidity at short notice without requiring the customer to give up use of the vehicle immediately. In exchange, the customer sells the vehicle and rents it back.

The consequence is clear: the customer remains mobile, but no longer owns the vehicle.

The model is not prohibited across the board under German law. At the same time, the German Federal Court of Justice has made clear that individual agreements may be contrary to public policy and void because they involve an imbalance akin to usury. A sound assessment is therefore possible only by examining the specific agreement, the vehicle's value, the purchase price, the financial burden of the rent and all the circumstances surrounding the conclusion of the agreement.

Anyone who looks only at the quick payout sees only the first half of the transaction.

The second half begins afterwards.

The Full Report

This article summarises the key points. The full report, “Das System Pfando – 3. Auflage”, contains a detailed analysis of the corporate structure, the legal classification, the economic logic, the practical recovery of vehicles and the comparison with Switzerland.

The report is available from HustlerBiz as a free download in German only. No English-language version of the full report is currently available.

Download the full report – German only

Sources and Editorial Note

This article is based on the report Das System Pfando, third edition, February 2026. The report draws on publicly available annual financial statements, commercial registry data, company statements, court decisions, regulatory assessments and journalistic sources. The current public description of PFANDO's sale-and-rent-back model and the decisions of the German Federal Court of Justice dated 16 November 2022, in particular VIII ZR 436/21, were also examined.

PFANDO's description of its business model

BGH press release no. 166/2022

BGH judgment VIII ZR 436/21

Section 34 of the German Trade Regulation Act

This article is intended for journalistic analysis and context. It is not a substitute for the review of an individual agreement and does not constitute legal advice.