The Los Angeles Times reports on the gouging business of rent-to-own tire shops:
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.
The rent-to-own market is huge:
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% since 2007, according to the Assn. of Progressive Rental Organizations.
Tires account for just a tiny slice of the $8.5-billion rent-to-own market. But they stand out from the industry’s traditional fare because — unlike with a dinette set — giving back tires means not being able to drive to work.
(via Tyler Cowen)