When the tires on their Dodge Caravan had worn so thin that the steel belts were showing through, Don and Florence Cherry couldn’t afford to buy a new set. So they decided to rent instead.
The Rich Square, N.C., couple last September agreed to pay Rent-N-Roll $54.60 a month for 18 months in exchange for four basic Hankook tires. Over the life of the deal, that works out to $982, almost triple what the radials would have cost at Wal-Mart.
“I know you have to pay a lot more this way,” said Florence Cherry, a 57-year-old nurse who drives the 15-year-old van when her husband, a Vietnam veteran, isn’t using it to get to his job as a prison guard. “But we didn’t really have a choice.”
Socked by soaring tire prices and short on funds, growing numbers of Americans are renting the rubber to keep their cars rolling.
Rent-to-own tire shops are among the newest arrivals to a sprawling alternative financial sector focused on the nation’s economic underclass. Like payday lenders, pawn shops and Buy Here Pay Here used-car lots, tire rental businesses provide ready credit to consumers who can’t get a loan anywhere else. But that access doesn’t come cheap.
Customers pay huge premiums for their tires, sometimes four times above retail. Those who miss payments may find their car on cinder blocks, stripped of their tires by dealers who aggressively repossess. Tire rental contracts are so ironclad that even a bankruptcy filing can’t make them go away.
Still, with payments as low as $14 a week, rent-to-own — long the province of sofa sets and flat-screen TVs — is proving irresistible for consumers desperate for safe transportation.
It’s also a booming business for specialized tire and wheel dealers that have become beneficiaries of a struggling U.S. economy. Fast-expanding chains with names like Rent-a-Wheel, which has two Upstate locations, that got their start selling high-end rims to car enthusiasts have discovered a lucrative market selling tires on time.
“We see tremendous opportunity serving people who are just looking for dependable tires to get to work,” said Larry Sutton, founder and president of Rent-N-Roll. The Tampa, Fla., chain has 66 locations nationwide with five in South Carolina including one on Broad River Road in Columbia.
A host of economic factors are pushing the growth of tire rentals.
Soaring costs for natural rubber and petroleum used to manufacture tires have pushed up prices. The average price of a passenger tire in the U.S. increased 57 percent in 2012 from 2006, according to data from trade publication Modern Tire Dealer. The prices on some popular sizes have more than doubled.
Consumers, meanwhile, have an increasingly difficult time affording big-ticket purchases.
Since 2009, median household income has fallen more than 5 percent. And in the wake of the recession, the number of households in the country with credit histories too damaged to qualify for most credit cards has risen to 35 percent from 27 percent five years ago.
With more people shut out of traditional financing, the rent-to-own industry has flourished. Promising no credit checks, small down payments and the option to return merchandise at any time with no questions asked, chains such as Rent-a-Center are raking in huge profits from a customer base that’s swelled to 4.8 million people, up 67 percent since 2007.