Auto loan lenders are using an annoying beeping box to make sure sub-prime borrowers pay on time. Cars are fitted with a device such as the “On Time” gadget. When the monthly payment gets near due, it starts blinking. On the due date, it starts beeping. If the payment isn’t made, then the device prevents the car from starting. After the borrower makes a payment, the lender gives them a code that resets the box and stops the blinking and beeping. Lenders love the device and say it’s reduced default rates by 30%. Maybe they should invent something like these for houses.
High-tech gear disables car if borrower misses payment [USAToday] (Thanks to Luis!)
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@FreeMarketGravy: I’m willing to bet that most people will not view the device in the manner you do, even if they think it’s okay for high risk people. You simply aren’t going to convince anyone that having such a device on their car is benign. I’d be willing to bet that most people would not want one on their car, and anyone who thinks otherwise is delusional.
@Pithlit: Please present to me statistics about how many of these boxes have or are expected to strand motorists who pay their loans on time or don’t try to argue with me using purely speculation.
And yes, humiliation is subjective. It’s ridiculous to not impose methods to protect lenders from intentional defaults just because some people care a little too much what others think of them.
@Pithlit: Maybe you’re right, maybe you’re wrong. Until you can prove otherwise, I’ll choose to believe the latter.
@FreeMarketGravy: Why should I present those statistics? It’s a man-made device, and man-made devices do malfunction. It doesn’t matter how many times it happens. That the risk is there is enough for me to know that I do not want it on my car, whether I’m a low life who doesn’t pay her bills, or an infallible saint who always does.
It’s ridiculous to for them impose such intrusive methods to secure their risk. Humiliation isn’t even the only reason why this is wrong, or the most important reason why it’s wrong. You’re locking on my humiliation comment, because you can’t argue the rest of my points. Having such a device on one’s personal vehicle IS an intrusion. If I don’t pay my car payment, they can come and get my car. If I’m not at the level that I’ve completely defauled, then they can report it to the credit beurau. Not shut off my car. This direct control of when I can and can’t drive my car would be an intrusion.
I challenge you to find too many people who think otherwise. They’d be few and far between. And they’d better get off their duffs and get their states to make this practice illegal, or they may find themselves with such a device on their car in the future, because they were a week late on their payment one month because it got lost in the mail.
@Pithlit: The last two paragraph should be connected. By “people who think otherwise” I meant people who don’t think such a device would be an intrusion on their own cars.
High risk borrowers are already being charged excessive interest rates in order to obtain financing. In most cases, a minimum down payment is required to enter into the agreement and is still subject to employer verification and reference checks where required.
Obviously the set criteria for obtaining financing has its hurdles, yet somehow a sub-prime borrower is allowed to take out a new loan and get yet another new [or used] car. Some blame does have to be put on the industry itself for going out and lending to these people despite the obvious risk associated with the borrower.
Going as far as installing a device that would disable the vehicle after non-payment is a petty way to get borrowers in line with the program and make timely payments. OK, genius, if your borrower can’t drive to work to make the money to pay the bill, how are you going to collect anyway?
In court?
Rather than make a change on their end and up their lending standards, the sub-prime lenders put a band-aid on the situation. They don’t change their behavior and they end up smelling like a rose in the end. People that pay on time or have perfect credit again hail such a move as a smart way for a lender to protect themselves when lending to people that aren’t likely to pay on time, if at all.
Honestly, lending money to a person that isn’t likely to pay at all, or runs the risk of paying late always is highly unintelligent. Sure, you see the dollar signs of all that added interest and late fees, but that’s just preying on people’s situations and possible stupidity.
@Pithlit: Sure, it happens. Every device malfunctions and if you swore off every electronic device that malfunctions even once, you wouldn’t have a TV, refrigerator, cell phone, landline phone, etc.
“You’re locking on my humiliation comment, because you can’t argue the rest of my points.”
No, I’m asking about it because you don’t get that humiliation is not a concrete concept.
“Having such a device on one’s personal vehicle IS an intrusion.”
No, it isn’t, because until it is paid off, it is not YOUR personal vehicle. It is the lender’s vehicle that they are letting you drive.
“…they may find themselves with such a device on their car in the future, because they were a week late on their payment one month because it got lost in the mail.”
And they’d deserve it for not mailing in their payments early like any responsible person does.
@tmlfan81: Exactly. If a company is going to decide to take that risk because they can get the higher interest rate, then why should they not also incur extra risk? Allowing them to install these devices in order to mitigate their risk only encourages them to relax their standards even further. They justify the higher rates because the customers are higher risk, then mitigate that risk with these stupid devices? I don’t get why people are defending that. Wait, I think I do. It’s punishing those low life irresponsible people, so it must be good. Why bother thinking about the consequences of reckless lending on the rest of us? Irresponsibility is being punished. That’s all that matters.
@FreeMarketGravy: They’d deserve to have their car shut off because the payment got lost in the mail? Oh, man. Thank you for letting me know that I’ve just been wasting my time with you. I deserved it.
@FreeMarketGravy: Despite the fact I’m wasting my time, I have to address this: Yes it most certainly is your personal vehicle, legally. Even if you lease. Their are rights that protect people, even if they don’t own their car, free and clear. They can’t come and dump garbage in the back seat just because I was late on a payment, for example. Just like a landlord can’t just enter a property they’re renting on a whim, even though they own it. There are procedures they have to follow if a renter defaults. A car dealership can’t come and demand they borrow your leased vehicle for the day, because they own it, can they? If you buy or lease a car, it’s legally your car, even if you miss a payment or two. It’s yours until they repossess it. Demanding the use of these devices is an intrusion on that ownership. If they can enforce such rights against ownership for them, then none of us truly own our cars anymore. It will indeed become the way you mistakenly think it already is.
@Pithlit: If people really do find them as humiliating as you say, then you have nothing to worry about. They’ll simply avoid patronizing lending institutions that try to institute them, and the idea will die on the vine.
Seems like the thing to do would be to buy a vehicle you can pay off in cash.
least then if all it does is takes you from point a to point b, you can live with that till you can pay for better.
@Orv: Except my opinion isn’t really based on selfish motives. I have great credit, myself, so I’m sure I have nothing to worry about at the moment. If something is wrong, then it’s wrong across the board. It’s wrong for companies to intrude on the ownership of the products they’re selling just so they can tap into an even riskier market and profit additionally, without actually incurring the additional risk.
And, it certainly doesn’t seem as though people are avoiding them, does it? That’s not good, because other lenders are looking at this and thinking about how they can incorporate something like this into their model. It’s naive to think otherwise. The very lenders that we Responsible Good Customers use. The dealerships that did this completely changed the notion of personal car ownership. Now that that’s out of the bag, other dealerships and lenders can easily say “But you don’t really own your car now, do you? We do” and use that justification for all kinds of loveliness that they couldn’t get away with when cars were considered our own even before they were paid off. I’m not just worried about these stupid devices.
The corporate trend across the board is to chip away at our rights as owners of products, and this car device is just another example of that, and it doesn’t matter that right now it’s only affecting high risk borrowers.
@Pithlit: I understand the argument you’re making that this is a slippery slope. I just don’t buy it. By your logic, requiring high-risk credit card customers to put up a deposit should have quickly evolved into all credit card customers having to put up a deposit, but that hasn’t happened. This is just a way for places that deal with particularly high-risk customers to mitigate that risk. It’s not going to head up-market because loan defaults aren’t that big a problem in other parts of the market. This is a business decision, not some kind of conspiracy against consumers.
But I’m not just arguing the slippery slope. I’m saying it’s flat out wrong, even when they do it to high risk customers. I only bring up the slippery slope argument to appeal to those who don’t care that it’s only the high risk population. It’s possible it may not happen as I fear it will, but the only way to ensure it doesn’t is to tell companies that it goes too far, period. Whether people are driven to do that from fear, and not because it’s simply the right thing to do doesn’t matter to me.
As to your second argument, well, for one thing, a deposit isn’t an intrusion. I’m not against offsetting risk. I’m against using intrusive measures to do so. Rigging a product a person buys so that you have control over how and when they use it is a far cry from a deposit.
To your third point, of course it’s a business decision. It doesn’t make it right. Plenty of business decisions harm us, and we have the right to tell a company to knock it off, and we do so all the time. It really doesn’t matter if this decision never affects the rest of us directly. They’ve changed the terms of ownership. It isn’t a conspiracy to claim that businesses will do what they feel they can get away with to make an extra buck.
You could be right and this would never affect anyone else except for the high risk consumers. What if you’re wrong? Your hunch is no more based on anything concrete than mine is. And because companies have indeed extended policies that were initially based only on high risk customers to the rest of us (credit card companies, insurance companies, just to name a couple), I’d say that my hunch has some weight to it. I’m not claiming it will come in the form of a control device in the car. I’m saying it will come in other, smaller, forms that will whittle away at our expectations as owners. I don’t think my hunch is all that far off to think that every time a business model succeeds at something like this, that others aren’t taking notice. Like I said, I think its naive to think otherwise.
@Pithlit: Without devices like this they wouldn’t be offering these people any loans at all. The people who have these devices are making a rational decision that a car with strings attached is better than no car at all. I respect their ability to make that decision. Why can’t you?
@quagmire0: It probably just disables the starter itself. So it just interrupts the circuit between the ignition switch and starter relay.
Easy to bypass if you know how to do it, but I imagine that most of the people having these installed in their vehicles wouldn’t have the know-how or motivation to do so. They’d probably be paying their bills on time if they did.
I think the whole point is that instead of taking true accountability of the situation, lenders would rather stick a device in the cars they finance to ensure a payment than to rethink all the time vested into sub-prime borrowers that simply won’t comply with a simple loan agreement.
Borrowers that go more than 20 days past due should get their vehicles shut off, unless they have made prior arrangements with the lender. [With a warning at 10 and 15 days past due, along with a certified letter]
I’m sure after the first twenty times a habitual late payer gets his/her vehicle shut off, they will get the idea:
KILL THAT BLACK BOX!
As a person of “less than perfect credit” stature, I would be terrified if the only financing I could muster up would be that from a lender that uses these devices to ensure a timely payment. I shouldn’t be made to feel like a criminal with an ankle bracelet that forces me to remain within a designated area.
If a borrower can’t remain in a designated financial area on their own, they shouldn’t be able to obtain financing. Simple as that. I’ve had to prove my ability to repay with well over a year of solid, on-time payments and the paying off of several past due accounts.
I get really peeved when a guy off the street with worse credit than me gets a loan and a great car, then never pays. They screw me over just as much as they screw over those with good credit. Don’t let people like that borrow freely – make them earn their approval like I had to.
@Orv:
The device is merely a band-aid on the situation.
@Orv: But, see, they would. You’re wrong. They already did give loans to these people without them. This is just a way to shore up their end of the bargain to make it less riskier for them.
These people aren’t necessarily making a rational decision. There’s often a reason they’re in the risk category they’re in. Many are in that category because they aren’t financially savvy. And it absolutely is unethical to take advantage of that lack of savvy. It isn’t disrespecting anyone’s choices by acknowledging this. Regardless for the reason they got into that risk category, it is wrong to take advantage of those circumstances and back them into a corner to get them to agree to terms they should have never had to agree to. It’s why usery is, or used to be, illegal. There’s no disrespect in that at all.
@aaron8301: I thought that was the code for Nintendo’s Mike Tyson Knock Out…
I’ve been wrong before…
And suppose you need to drive to the post office to drop the payment in the mail or over to the lender’s office to make the payment?
Who pays to install the device? To remove it? Will it void your auto warranty or service contract?
@chrylis:
Except that paying the entire balance of a new car at purchase gets you placed on a federal anti-terrorist watch list.
@CyberSkull:
Logically, it can’t/won’t void your warranty. The lender isn’t going to place a device on the car that further devalues the car, because then they’re shooting themselves in the foot in case of a default.
@Orv:
Annual fees for credit cards are still a common occurence. The only reason they’re not mandatory is because most people would refuse the cards.
That’s one of those cases where, you know, people spoke up *BEFORE* the policy was implemented.
@RvLeshrac: Who says logic applies at the point where your lender wants to put a killswitch in your car?
@Pithlit: You’re seriously my favorite poster.