FEBRUARY 2011
                                        

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A well-worn tire with more than two thirty-seconds of an inch of tread and no other damage is not only a marketable product, but is in strong demand these days by thrifty drivers in a trying economy. “Technically, used tires are not scrap tires. These are tires that have been worn, but still have enough tread to be legally placed on another car or truck,” said Michael Blumenthal, who works primarily on scrap tire issues as vice president of the Rubber Manufacturers Association (RMA).

RMA is the national trade association for the United States tire manufacturing industry. RMA members manufacture about 85 percent of the tires shipped within the United States annually.

All tires sold in the United States are required by federal law to have “wear bars” – molded strips of rubber that indicate when a tire is worn to two thirty-seconds inch. Many states require tires worn to two thirty seconds inch of tread to be removed from service. Tire manufacturers and the National Highway Traffic Safety Administration (NHTSA) also recommend that tires be removed from service when worn to that level. NHTSA has many other guidelines such as tires being free from chunking, bumps or bulges, showing cord, ply or tread separation. State motor vehicles agencies set individual standards for tread wear and damage, and pass or fail is normally at the discretion of the individual inspector.


RMA estimates that roughly 30 million used tires are sold each year, which represent about 10 percent of the approximately 300 million scrap tires annually pr­­­ocessed in the United States. Many used tire shops and wholesales sell only used tires, some sell predominately used, but also new tires. Profit margins on used tires can be much higher than on new tires and starting up a used tire business requires minimal capital investment for equipment and inventory. That likely explains the recent proliferation of new used tire shops.

In 2006, RMA looked at 14,000 scrapped passenger car and light truck tires recently brought out of service. Based on that, RMA found that most tires come out of service after three to four years, but no determination was made for tire mileage. Of course, tire mileage greatly depends on the quality of the tire, personal driving style, wheel alignment, tire pressure and other factors. High quality new tires can get over 60,000 miles while cheap ones can get as little as 20,000. Used tire dealers thrive on those drivers who buy quality tires and replace them early to ensure safety,

When an old tire is removed from a vehicle, the transformation of the scrap tire to a used tire typically takes place at the retailer when the hauler, the company that picks up old tires, culls out those tires with enough tread to be sold used. “Just about every hauler goes though and inspects every tire they handle to see if they can pull that tire out of the scrap tire flow and make it into a used tire because they can make a few dollars on it,” said Blumenthal.

Retailers pay haulers on a per tire basis to recycle old tires. Prices may range anywhere from $0.75 cents to $1.25 per tire depending on volume and other considerations. When used tires arrive at a tire recycler, they undergo additional inspections to qualify for resale. Retailers then buy used tires in bulk lots, usually by the truckload. Tires are usually inspected again and pressure tested when resold by the used tire retailer.

“The market for used tires is typically a function of the economy. From the middle of 2008 up though this year the number of used tires went down because the general driving public has been getting the maximum number of miles out of their tires. Because people are wearing tires out and because the sales of new vehicles went down the entire replacement market and new tire sales took a hit,” said Blumenthal. “Now that the economy is slowly coming back we are expecting a 6 percent increase in new vehicle sales and a 9 to 11 percent increase in replacement tires. The number of used tires available should start to increase in 2011 and 2012. It’s not going to be a sudden influx of useable tires, but we will begin to see a trend back to normal purchasing patterns.”

Over the past several years, especially since the 2008 financial meltdown the number of used tire retailers and wholesalers has exploded nationally. The growth in retail shops is due to increased demand by the public for a cheaper alternative to buying new tires, which have risen dramatically in price. In turn, this has driven the growth of wholesalers that supply bulk lots. Wholesalers have seen increased demands from domestic and export markets.

Marvin Bozarth, former manager of the International Tire and Rubber Association and now senior technical director for the Tire Industry Association, gave his take on the used tire situation. “There has always been a strong market for used tires. Recently, there’s been some static coming out of Europe that used tires should not be sold for safety concerns, but that is not going to happen in this country for many years because it’s an important market for many people with lower incomes. When you consider high fuel prices and taxes on vehicles, it’s tough on a person making $10 or $12 dollars an hour to operate a vehicle. They can’t afford new tires. New tire prices have also gone up drastically and they will be going up again shortly because of the shortage of natural rubber and other factors.”

“Our business is booming!” said Sam Hawa, owner of Dinosaur Tire and Performance Center and Used Tires Wholesale, both companies based in Fort Lauderdale, Florida. Approximately 60 percent of Hawa’s business is used tires. “Without used tires, I would probably be out of business. The used tire business is good. Everybody, it seems, is opening a used tire store. I would say that 3 out of 10 of our wholesale customers are brand new people who just opened a store and they want a truckload or container load of tires.” Howa buys used tires from recyclers and dealers as far north as Canada. “Anyone who offers tires to me, I buy. Supplies are available, but there’s a lot of competition these days.

“Tires we sell at retail are usually 50 percent and above in tread wear,” Howa added. His retail used tires are inspected, pressure tested, mounted on rims, balanced and installed on vehicles at prices ranging from as low as $20 to as high as $45 dollars per tire.

On the retail side, Howa sells approximately 1,200 used tires per month, but he sells tens of thousands more each month at wholesale prices. For a load of 800 to 900 tires, his wholesale prices range from $10 to $12 dollars per tire, dependent on condition. He exports two to three 40 foot containers per month to the Caribbean and ships truckloads throughout the southeast.

In reference to what Hawa attributes his increased sales of used tires to, he stated, “People are broke and they are watching what they are spending.”

But not all used tire dealers are prospering. “The past couple of years it’s been slow, it stinks,” said Chad Pellerin. Pellerin’s family operates Arizona Retreader. They have sold used tires in the Phoenix area for over 40 years. Approximately 75 percent of Pellerin’s sales are used tires.

“Over the past 3 or 4 years, I would say 40 to 50 new used tire stores have come into the Phoenix market. It seems like there is one popping up on every corner. Within the past two years, three have opened within one mile of me.”

Like many western retailers, Arizona Retreader’s prime supplier of used inventory comes in truckloads from Lakin Tire, one of the largest tire recycling companies in the country. Lakin operates a nationwide network of agents and a fleet of trucks that pick up waste tires and takes them to its collection plants where they are evaluated, either for shredding and for recycling, or selected and graded as used tires for resale. Large truck and heavy equipment tires may be recycled as casings and sold to retreading companies.

“I try to buy tires that have 50 percent or better of tread. For a single used tire, our average sales price is $20 to $30. Mounting, balancing and installation ranges between $11 and $20, depending on size. We have a lot of repeat customers. Instead of laying out $800 for a set of new tires, you can spend half to a quarter of that for used,” Pellerin concluded.

A good used tire from a quality manufacturer may actually last longer and be safer than some of the new, cheap tires being sold.