Make That Payment
Or Your Car Might Not Start
By Daniel Muniz

Finance companies that cater to subprime consumers for auto loans have adopted a novel approach to thwart defaults and repossessions. They have begun to install high-tech electronic boxes on top of dashboards of the vehicles that specifically monitors whether or not car payments have been made.

Although there are many different competing brands that these companies use, it basically works like this.

When a payment is coming due, there is a blinking light to remind the driver to pay up. And the day that the payment is actually due, not only is there a flashing light but there is also an annoying beeping sound which is intentionally designed to be irritating as possible. As a result, there really is no way that someone can casually forget about the due date of their car payment because of this electronic reminder.
 

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And once the payment is made, the lender then gives the consumer a special code to punch into the box although this procedure will probably become completely wireless somewhere in the near future. This cycle is repeats itself for the next payment and continues until the car is paid in full.

But the beauty of these devices is that if a payment does go past due, the car will not be able to start at all because a kill switch is automatically triggered rendering the ignition useless. And only the correct code given by the lender when a payment is made allows the car to run again; otherwise, it is as dead as a door nail.

From the point of view of the finance company, having a car that won’t start is perhaps the most effective way to remind someone that they have to pay up.

However, if the auto loan goes too far into default, a GPS signal announces the exact location of the vehicle to the repo man. So instead of having to play a cat and mouse game of trying to figure out where a vehicle is hidden away at, the repossession process is now amazingly efficient and tremendously easier.

Of course something like this was bound to happen sooner or later once technology became more sophisticated and ridiculously cheap. In fact, technology has vastly improved in the past the decade that GPS and wireless communications has now become so commonplace in our society.

Some car rental companies have already been experimenting with similar devices in their rental cars to verify whether or not customers are adhering to the restrictions of their written agreements. For example, suppose a restriction prohibits the renter from driving the car out-of-state, the hidden GPS system notes the violation and then the rental company socks the driver with a hefty surcharge and other penalties.

In addition, there has always been a credit crunch for people with lousy credit scores.

There is a reason why consumers have an awful credit rating but the market is just too large for finance companies to ignore which is why they offer subprime loans. However, the biggest headache for finance companies has always been hounding the people who are behind on their car payments or exercising the last resort of repossession if it becomes apparent that the payments are not ever going to be made.

Although there is big money to be made from subprime consumers, there is also a lot of it to lose in these types of car loans from risky borrowers.

However, these little boxes alleviate a good portion of the problem.

No longer can a driver still have use of his or her car when a payment is missed. And the ease of the repo man finding the vehicle takes away the opportunity of someone trying to scam a free car for a few months.

However, not everyone is exactly thrilled with Big Brother being inside their cars.

Admittedly, it is a bit creepy to be monitored in this way and it is not a big surprise that a lot of people scornfully resent it.

These boxes will probably never catch on in the prime or super prime market because having a very good credit score allows people to have plenty of choices for their lending terms. Consequently, many such consumers won’t subject themselves to having Big Brother watch over their payment histories.

But on the other side of the coin, such a monitoring system allows the people who cannot get normal loans the opportunity to have a car. That is just a tradeoff with having shaky credit.

Interestingly, perhaps it is not all that surprising that some of these finance companies have found a handful of people who actually like being monitored in this intrusive manner. And that is because this little box now gives disorganized and sometimes incoherent consumers a rigid set of discipline that they would otherwise not have. Unfortunately, that is how they trashed their credit in the first place and the box prevents them from messing up their auto loans.

Yes, it is a bit childish but maybe that is the best way for some people to conform to rules and boundaries. And for those folks, it is also another way, albeit draconian, to help rebuild credit.

It just seems a bit eerie that before you put your key in the ignition, you had better made your car payment or that engine won’t start.

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