In an economy where unemployment is rampant and household incomes have plummeted, businesses designed to further screw cash-strapped Americans out of what little money they do have happen to be booming. Among them are rental wheel and tire companies, which are doing great right now, thanks for asking!
A recent story in the Los Angeles Times reveals how rental tire businesses are becoming increasingly common across the country, despite how they charge massive premiums for their tires, often up to four times over the retail cost.
The story highlights one family who agreed to pay $54.80 a month over 18 months for a basic set of Hankook tires, which came out to $982, or three times what they would have cost upfront at Wal-Mart. Another paid $164.10 a month for 18 months for Chevrolet Silverado tires, bringing the total close to $3,000. A replacement set would have cost $1,340 at a regular store.
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.
One family missed a weekly payment of $41.90 (!) for tires rented from their local Rent-A-Wheel shop, leading the business to send the police to their house, though the Times concedes that such an outcome is "rare."
It's absolutely insane to think that people are paying this much in interest on rented tires. But what are they supposed to do? As the story notes, tires have skyrocketed in price over the last few years, but people need tires for their cars.
Lacking good credit or the money to pay for new tires up front, they get locked into high-interest contracts at the rental shops that give them the tires they need at what seems like a low price but ends up screwing them over in the end.
Meanwhile, the rental companies themselves are seeing record profits. Rent-A-Wheel hit $100 million in sales last year, the story says, and they have "aggressive expansion plans." A chain called RimTyme "averages more than $1.4 million a year in sales across its 25 locations, nearly double the take at parent company Rent-a-Center's traditional furniture and electronics stores."
Good to know someone is doing okay during the recession.
Photo credit Shutterstock
Hat tip to Wayne!