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Would You Sell Used Tires?: Dealers Can Reap Plenty of Profits But They Face Legal, Ethical Questions

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Would You Sell Used Tires?

Dealers Can Reap Plenty of Profits But They Face Legal, Ethical Questions

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No one flinches about buying a “previously owned” car. Millions trek to garage sales every weekend looking for bargains. Dedicated stores sell used books, records, CDs and videos. Experienced bats and gloves take to the field again via a chain of franchised used sporting goods stores. Teens scrounge through thrift stores looking for the latest in retro fashions. Houses, planes, boats, motorcycles, pets, place settings, wedding gowns, furniture – countless pre-owned items find new owners every day.

The sale of used tires is certainly not a new phenomenon in the tire industry. Even before retreading offered the option of a fresh tread on a used casing, tire dealers have been selling used tires to retail customers.

But today it is a subject virtually no one talks about – from manufacturer to dealer to trade association – almost as though it was a dirty little secret they’d just as soon not share.

There are no statistics on how many used tires are sold because there is no way track such transactions. But based on anecdotal evidence from the dealers we spoke with, fewer of them are turning away from the almost 100% pure profit possible from selling used passenger and light truck/SUV tires.

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While not hiding the practice, most dealers who do sell used tires are generally pretty quiet about it. Some venture to post small signs. The bolder roll out a rack of their used tire fare. A handful are more aggressive, with sale flyers, mailers, Web sites and materials promoting their burgeoning used tire business.

But some tire dealers won’t have anything to do with used tires. “We’re in business to sell new tires,” said one we spoke with.

What is unusual is that the retail sale of used tires appears to be on the rise even while tire failure-related litigation garners headlines, tire companies and trade associations warn consumers about tire maintenance and safety, and business insurance rates climb rapidly.

Legal, But Is It Ethical?
There is nothing illegal about selling used tires, and dealers and used tire brokers we spoke with were quick to detail the inspection process they put each candidate through before a used tire is selected for sale.

Some “used” tires are barely used, coming from consumers who bought new tires, drove on them for a few hundred miles and then changed their minds. Or they’re factory blems from “unknown” sources. Most, however, are takeoffs that have some useful life left on them – as little as 4/32nds of an inch, according to some.

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“Most tire dealers sell used tires and find it to be a profitable part of their business,” said Marvin Bozarth, a consultant to TANA/ITRA. “There has been some comment that used tires are not safe, and I think this is a bunch of bologna. If you damage a valve stem or a wheel the day after you buy a new set of tires you will be mounting a used tire on your vehicle when the wheel or stem is replaced. In my opinion, there is nothing wrong with selling used tires as long as they are thoroughly inspected and declared safe.”

Still, there are any number of philosophical arguments that could be waged, such as:

  • Aren’t tire dealers in the business of selling new tires?
  • Doesn’t selling used tires devalue the technological advantages of new tires in the minds of consumers?
  • Isn’t the image of the entire industry – supplier through retailer – seriously damaged by the active sale of used tires?
  • With so many tire product liability suits today, why would anyone risk exposing themselves – or their suppliers – to potential costly litigation?
  • How can the industry push the technological advantages of its new products and stress the importance of proper tire care, yet turn an almost blind eye to the sale of used tires?
  • When so many studies have clearly shown that consumers seriously neglect their tires, how can dealers sell used tires when they don’t know the maintenance history of them?

Legally, tiremakers and marketers can do nothing to control the actions of independent dealers. Reading between the lines of this statement from Michelin North America – typical of those Tire Review received from other tire companies – there is no doubt tire companies would prefer their dealers would stay out of the used tire business.

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“The manufacturer can set guidelines for how new products should be sold and serviced,” the statement read. “A manufacturer cannot control nor be responsible for the business practices of individual, independent retailers.

“A liability concern regarding the sale of used tires centers around the fact that a used tire may have some latent damage from a road hazard impact, underinflation, etc. The damage could be such that only a skilled tire examiner could detect it. In such a circumstance, it is questionable that a consumer would ever to be in a position to make an informed buying decision.”

The tire dealers we spoke with – as with any dealer selling used tires – surely have wrestled with some or all of these concerns and questions. Each dealer we contacted had their own level of participation, primarily dictated by their local market, yet none were apologetic about offering used tires.

“Sure, everybody does,” said Mike Herchick, owner of Herchick’s Tire Service in Macedonia, Ohio, when asked if he sold used tires. “You usually get the tires for free. Why wouldn’t you want to sell them if they’re still usable?”

Herchick gets some of his used stock from other dealers and the rest from takeoffs. “I had people come in here with vehicles that had Firestone tires on them that were not under recall. They wanted them off just because they said ‘Firestone’. ‘So what would you like to do with them?’ I’d ask. They said, ‘Throw them away.’ I didn’t throw them away.”

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Many Sources of Supply
It’s likely most dealers who sell used tires simply sell their own takeoffs. Like Herchick, they figure the tires costs them nothing and their profit on each sale is 100%, though the time necessary to inspect and repair (if necessary) each tire does have a labor cost attached, plus any repair materials used.

Dealers can also buy some or all of their used tires from casing jockeys or from one of the dozens of regional and national used tire wholesalers around the country. Guys like Ben Rallo, who has spent the last 49 years building his used tire empire.

Ben’s Tire International in Fairfield, N.J., has just four employees – 69-year-old Rallo, and his two sons and one daughter. While most of his business comes from overseas sales, Rallo does have some domestic business. Over 90% of his business is in used passenger and light truck/SUV tires, he said, and he buys from both casing jockeys and from “some very big people” who collect used tires nationwide.

“We cater mostly to the blue collar market,” he said, “the guy who has two cars and maybe can’t afford a lot for tires for his second car, or the guy with kids in college who needs tires but can’t afford a lot.”

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Every tire he takes in is inspected and graded by both the seller and by Rallo or one of his sons. “Our rule of thumb is that if we wouldn’t drive on it ourselves, we junk it. We junk probably a container load each month,” he said, and those tires go to a salvage company.

Rallo said the used tire business has been very lucrative for him and many others. “It’s put three kids through college,” he said, and has given him three homes up and down the East Coast.

Jordan Flatt runs one of Des Moines’ busiest tire businesses, the two-location, tires-only Flatt’s Tire Centers. And Flatt makes no bones about being a major used tire dealer. The company’s Web site proclaims Flatt’s Tire as “one of the largest used tire dealers in the Midwest.” It’s a title Flatt wears proudly because that’s how his father started the business some 50 years ago.

Flatt’s father and uncles started out in retreading, with Jordan’s dad collecting casings for the growing business. “He discovered that a lot of the tires they retreaded still had useable tread on them, and he realized those were saleable without the added cost of processing and retreading them,” he said.

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He eventually broke away from the family retreading business, and Flatt’s Tire grew from there. Today, used tires make up 60% to 70% of the company’s unit sales, and 40% of its revenues, Flatt said. But used tires account for some 90% of the company’s profits.

Flatt’s Tire maintains a used tire inventory of between 10,000 and 12,000 units, built up from its own takeoffs, tires collected from other dealers, and from recyclers and shredders. “I only buy the best,” he said, and each unit gets a thorough going over, including a complete inside and out inspection using a tire spreader and lights, patch/plug repairs as needed, and a paint job. He even uses the same blue coating tiremakers use to protect white lettering.

Flatt’s Tire is still a big new tire dealer; they just concentrate on the upper end. “The way we’ve marketed ourselves is to sell only the higher end new tires,” said Flatt. “I don’t offer a 35,000-mile tire. I’m starting with the 60,000-mile tire. We try to be the brand ourselves. I just want customers coming in looking for a tire. The salesman can help them find the best deal for them.”

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How do new tire suppliers feel about his business? “I don’t really worry about it. The two things are mutually exclusive. Fortunately I’ve started getting enough clout on the new tire side that they pretty much leave me alone. I move enough rubber out of here,” Flatt said.

Who Is The Used Customer?
With all the financing options available today – easy-to-qualify credit cards, low/no interest rate deals, deferred payments – and low price options (4 for $99 sales, wholesale clubs, etc.) there are few reasons why any consumer could not afford all new rubber. Still, there are a lot of potential used tire customers, and there always will be.

Layoffs, bankruptcies and plant closings have put hundreds of thousands out of work over the last year. Some inner city and rural areas are so poor the residents can’t afford anything else. Young people or older folks on limited or fixed incomes may not have enough cash to buy new and simply need a tire to tide them over. Second or third cars may need tires, but the owners just don’t have the money. And there are always those just looking for a bargain.

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For some dealers, it’s either sell these customers a used tire to keep them safe until they can afford new rubber, or turn away a ticking time bomb. Others, like Dave Mogel, manager of a Tire Kingdom location near Cleveland, try everything they can to get the customer on new tires.

“We had one guy in here a few weeks ago who needed some work done on his car,” said Mogel. “He had a tire that was worn into the belt. I wouldn’t let him out of here without a new tire. It just wasn’t safe. But he had just lost his job and really couldn’t afford a new tire. So we worked with the guy and figured out a way to do it. We didn’t make any money on the tire, but he’ll remember how we helped him out and kept his car safe. Down the road, he’ll be back.”

Mogel’s store is in upscale Hudson, Ohio, home to many high level corporate executives. But his store, formerly Mueller Tire, serves a wide geographic area, covering every economic sector. While Mogel doesn’t necessarily see anything wrong with the practice, Tire Kingdom’s policy – and that of the previous owner – is to not sell used tires.

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“We’re here to sell new tires, so we try to find a way to get a customer a new tire,” he said. “We’ll work with people to help them out. We would never take tires from someone who is selling used tires, mostly because we have no idea where they came from.”

Dan Severson, owner of Pioneer Tire & Auto Center in Westfield, Wis., serves a different type of used tire client. While he doesn’t sell a lot of used tires, the few he does are to “people who have an emergency need on the road and just want to put something on to get where they’re going.”

Severson acquires his own stock. “I keep my half-tread takeoffs. I won’t sell anything less than 6/32nds,” he said.

“We sell them as temporary emergency tires just to help people get home,” said Severson. “I’m sure some people drive them until they’re bald, but we only really sell them for on-the-road emergencies.”

“The price-conscious customer can save a lot of money,” said Flatt. “I have a lot of matching sets of four or matching pairs of tires, and I warranty those for three months against any kind of defects or problems – vibration, separation or anything like that. With our inspection process, we’ve found, if a problem doesn’t turn up after three months it’s probably not going to happen.”

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“We have customers just looking for something cheap. And I’m a firm believer that if I have a set of takeoffs here like an almost new set of Michelins or Coopers that have 500-700 miles on them, you’ll be a lot better off with those than a new set of 25,000-mile specials. I’d rather have a used Mercedes or Porsche than a brand new Yugo,” Flatt said.

Legal Issues Abound
In today’s highly litigious society, it seems consumers are looking for any excuse to sue someone. Consider the thousands of tire product liability suits filed just in the last two years against Bridgestone/Firestone, Goodyear, Cooper and others. As a result, liability and business insurance rates have skyrocketed, putting an added crimp on dealers.

So why would any tire dealer risk the added exposure from selling used tires? What is a dealer’s risk – and, for that matter, what is the tiremaker’s liability – should a used tire fail with catastrophic results?

No less an expert than Tab Turner, the Arkansas trial lawyer who has made a nice living suing Ford and Bridgestone/Firestone in rollover and tread-separation cases, said both could be liable under certain circumstances.

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“Under most state laws, anyone in the ‘business’ of distributing products, tires for instance, is legally responsible if a defective product, new or used, is distributed to consumersÉand the tire was in generally the same condition as it was when manufactured, other than ordinary wear and tear,” Turner said.

“It does not matter that the used dealer has no knowledge that the product is defective, only that the dealer distributed the defective product to the ultimate consumer. If the tire is defective by design or contains some manufacturing defect, the manufacturer, not the dealer, will be held ultimately responsible, but the dealer can likewise be subject to a claim under most state laws.

“But, if the used tire is not designed defectively and was manufactured appropriately, but failed due to abuse, lack of maintenance or some unforeseen damage to the product, neither the dealer nor the manufacturer is liable,” he said.

So, what does a dealer need to do to protect himself from liability in the event a used tire fails?

“As a general rule, dealers of used productsÉneed only be honest, truthful about what has or has not been inspected, inform the consumer of the known dangers associated with the used product, and make sure the consumer understands that the product has been used and may not be in good condition,” Turner explained.

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“Some dealers use disclaimers such as ‘this product is being sold as is with no representation as to quality.’ That can be attempted as a limit on exposure.”

Regardless of what the generally accepted rules of law are, some juries just don’t see it that way. Just ask Goodyear, which was socked May 3 with a $36.9 million judgment in a liability case involving a used tire.

The Duval County (Texas) Circuit Court made the award to the family of a man killed when a well-used Kelly-Springfield tire the man had bought from a Quick Lube location just days before allegedly separated, causing him to lose control of his pickup. The jury said Goodyear was liable because it knowingly marketed what they felt was a defective tire – even though the tire in question was nine years old and had four puncture repairs, including one repaired improperly.

Used and Abused?
But as a general rule, neither the tire dealer nor the manufacturer knows the history of a tire once it leaves the dealer’s lot. Were the tires run underinflated, overinflated or over loaded? Were they slammed into speed bumps, chuckholes or curbs? If punctured, were they repaired properly (patch and plug)?

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Dealers know very well that consumers don’t care for their tires, and any number of studies has proved this point in spades. Regardless of the unknown history of virtually any used tire, dealers seem relatively unconcerned.

“We’re insured obviously. I don’t really have that much concern,” said Flatt. “We’ve been doing this for a long time, and I’ve never had a problem. We’ve never been sued for a defective used tire. I’m actually as concerned about selling new tires now because the blood’s in the water and the sharks are circling.”

“Common sense has to prevail,” said Herchick. “We inspect the used tires we sell to make sure they’re OK and they’re roadworthy. After we mount them, we tank them to make sure they’re all right.

“I’m sure there’s a liability issue there. Most customers understand that they are buying ‘as is.’ They make a decision when they look at the tires whether they want them or not.

“I explain that I’ll sell them a used tire, and if something goes wrong with it in a week they should bring it back and I’ll look at it. If it doesn’t have a big bolt sticking out of it or something, I give them some consideration. But after a short time, the tires are theirs.”

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Is It a Realistic Risk?
While they can’t come right out and say it, tiremakers aren’t thrilled with the entire idea of selling used tires. “We can not speak on behalf of the entire industry,” said a spokesman for Bridgestone/Firestone. “What we can say it that BFAH understands that there is a market for and in used tires. We hope that all of those who trade in those tires use good judgment and common sense in products they offer for sale to customers who rely on that judgment for their safety.”

But are they sticking their necks out too far? Not according to Tab Turner. “All dealers in used products have to do is recognize that they are legally responsible if they distribute defective products, be honest and truthful to consumers, fully inform consumers of the known risks associated with the used product, inspect the product to ensure that it does not contain a defect, and make sure that all information provided by the manufacturer regarding usage are followed and relayed to the consumer.

“Dealers cannot and are not expected to be as informed as manufacturers about the intricacy of the tire design and manufacture, but they are accountable for ensuring that the ultimate consumer gets to make an informed choice about what tire he/she wants their family to ride on,” Turner said.

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