Planet Money
12:19 am
Fri June 14, 2013

Why More People Are Renting Tires

Originally published on Fri June 21, 2013 10:44 am

"Oh, I checked every place in town, and they were outrageous," says Shannon Kelly. "It would be anywhere from $4[00] to $500, and I just don't have that right now."

Kelly had just walked into Rent N Roll, a rent-to-own tire store in Ocala, Fla. She was looking to rent a set of tires for her truck. Tire rental stores like this one have been around for a while, but until recently, most of their customers rented fancy rims. These days, it's becoming more common for the stores to rent simple tires to people who don't have the cash to buy tires outright.

Customers like Kelly can walk out of the store with a new set of tires for about $30 — and a promise to make lots more payments in the future. In the long run, some renters wind up paying twice as much for their tires as they would have paid if they'd bought them outright.

Lots of factors have driven more people to rent tires. Tighter credit means fewer people using credit cards to buy tires. Stagnant wages and high unemployment make it hard for many people to come up with enough cash to buy new tires. The price of rubber went up a while ago.

And, in 2009, the U.S. imposed a tariff on Chinese tires as part of a trade fight. That drove up the price not only of imported Chinese tires, but also of other tires, which no longer had to compete with the cheap Chinese imports. By the time the tariff was removed last October, the price of imported tires had risen roughly 40 percent. And that rippled all through the tire market.

Even if tire prices start to come back down, the tire rental business isn't going anywhere.

"I understand that I'll probably end up paying a lot," says Lyn Warren, a manager at McDonald's, who just signed up to rent brand new tires for his 2000 Honda. "But right now, I need the tires."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

LINDA WERTHEIMER, HOST:

Now here are some things you typically hear of people renting: apartments, tuxedos, movies. But how about tires for your car? Turns out that is becoming more common.

NPR's Zoe Chace from our Planet Money Team explains why.

ZOE CHACE, BYLINE: Renting to own tires is not a brand new thing. It's just for years it's been way more about fancy rims, like the ones on the cars in music videos.

JULIE MARTIN: There's a rim down there that I like, the one that looks like a star kind of.

CHACE: Julie Martin is a school bus driver here in Florida and she's just pulled her Cadillac 300 into the Rent N Roll, a tire shop and rental place on Route 200 in Ocala. She tells Damon Lucas, the sales manager here, she wants something fancy.

DAMON LUCAS: It's a good looking car, so it's not going to take much to, you know, make it look that much better.

CHACE: Now this has been the typical customer in a rental tire place - fancy rims, higher prices. But more and more often, these days, you'll have the Shannon Kellys of the world, pulling into the Rent N Roll, looking for just a basic set of tires.

SHANNON KELLY: Oh, I checked every place in town and they were outrageous.

CHACE: Kelly's driving a truck. She's on disability, she's got six kids and her back two tires are shot. And these days, especially, that costs a lot.

KELLY: It would be anywhere between four to 500 to pay, outright, for that, and I just don't have that right now.

CHACE: What she has, is 40 bucks - two 20s. And when you're renting tires, that'll do it.

LUCAS: Thirty-three dollars and ninety-two cents.

KELLY: And that's just the first payment. Since I go weekly, when I come back, next week I only have to do 18.

CHACE: The way it works, she comes back every week and pays a little bit more. Eighteen months later, your tires are paid off. Yes - 18 months.

Many people pay it off faster, but if you take the whole time, you're paying double the cost of the tires by the end. That's like 140 percent interest rate. You'd get a much better rate just buying the tires outright with a credit card.

KELLY: I do not have credit to get a credit card. I would be dangerous with a credit card, so I do not want a credit card.

CHACE: This is probably one of the reasons behind the rise in tire rentals. Since the financial crisis, banks have tightened up; it's harder to get a credit card. Wages are flat. Unemployment is high. Lots of people just don't have $400 or $500 lying around.

Another reason people are renting tires instead of buying them; they just cost more than they used to. The price of rubber's gone up and there's that international trade war.

STEVE SUTTON: And then - what, about four or five years ago, they put a tariff on the Chinese tire.

CHACE: Steve Sutton is the boss of this Rent N Roll.

Here's what happened. In 2009, labor unions claimed that American tire companies couldn't compete with the Chinese - that China was unfairly subsidizing their tire industry. The Obama administration agreed and slapped a 35 percent tax on imports of Chinese passenger tires. That was one out of every seven passenger tires in the U.S.

SUTTON: What happened is it pushes the tire prices up for all tires. And we noticed it. You know, tire prices went up almost overnight.

CHACE: Industry experts say the price of imported passenger tires jumped roughly 40 percent over the time the tariff was in place. The tariff came off in October. Chinese tires are back. But even if the prices start to come back down at this point, the tire rental business isn't going anywhere. In this economy, there's always going to be people who can't afford to pay up front.

Rent N Roll is planning more shops.

LYN WARREN: They making some good money because nobody else does this, so...

CHACE: Back in the Rent N Roll parking lot, Lyn Warren, a manager at McDonalds, just signed up to rent brand new tires for his 10-year-old Honda.

WARREN: I understand that I'll probably end up paying a lot after I'm done paying for them. But right now, I need the tires, so I'd rather be safe than sorry.

CHACE: Zoe Chace, NPR News. Transcript provided by NPR, Copyright NPR.