Tech Replaces Repo Man

Oct 2, 2014 by

car being towed

The repo man may become outmoded.

The “repo man” is that guy who cruises neighborhoods at night in a tow truck searching for vehicles driven by people who are late with their car loan payments. When he finds his prey, he hooks up the truck and hauls away the loan’s security. (But even that doesn’t end the matter. See “Does Repossession Cure Debt?” to learn more.)

Repossession Goes High Tech

Oblivious to the recent debacle in subprime home lending, auto lenders have worked hard to develop the subprime (borrowers with credit scores below 640) auto loan market, offering seven and eight year loans and other strategies designed to make monthly payments low. Sadly, many consumers have been coached by shrewd marketing into believing that if a payment fits (however tightly) into their monthly budget, that means the item is affordable!

The lenders understand very well their subprime customers’ credit riskiness, and many are moving to new technology to replace the outmoded “repo man”: a remote starter interrupt device.

What’s a Remote Starter Interrupt Device?

If you’ve ever lived in a cold climate, you’ve probably heard of a remote starter, a gizmo that lets the cold intolerant start a vehicle from the comfort of home with the push of a button so the car’s toasty inside before the owner ventures out. A remote starter interrupt device prevents a car from starting, also by the push of a button. But that button is in the hands of the lender, not the car owner.

Car Won’t Start? Be Sure You Haven’t Missed a Payment Before Calling the Mechanic

Remote starter interrupts have been installed in about two million vehicles, and are now involved in about 25% of all US subprime auto loans. Once installed, the lender can make a car inoperable with a mouse click or app tap. GPS technology included in the device allows the lender to track a vehicle’s movements and location (makes the repo man’s job a lot easier, if his service is still needed), and the interrupter emits a beep at increasing volume as a payment due date approaches.

Check out this New York Times video of one subprime borrower’s experience with a remote starter interrupt device.

What Do You Think?

Are you bothered that those with low credit scores are subjected to remote starter interrupt devices if they want to own a car, or is that a legitimate part of the price you pay for poor credit? Borrowers consent to installation of the interrupter. Of course they’d not get the loan, or a car, if they didn’t consent.

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  • I’m not a big fan of this because there are established laws regarding when the repossession process can take place (as in, how many days past due) but with this device, they could literally stop your car after being 3 days late (and what if those three days were over a long holiday weekend with a banking holiday?). I get it that people who can’t afford a card don’t deserve to have one for free, but I’ve heard anecdotal stories of it being overused. That story of the woman claiming her car stopped while she was driving is scary as hell and should be illegal.

  • I agree with the other commenter. Judging from a borrower’s point of view, it might be inconvenient to not be able to start a car when we actually need it, especially if it’s for emergency. There should be some regulation on how this device should be used.

    • Yep, there will be a lawsuit sooner or later when someone dies or a baby can’t be delivered in a hospital because a car’s ignition had been disabled.

  • Every time I buy a car, the first line is always “what do you need you payment to be?”, I always say “I was looking for around $0 per month, since I am paying cash.”.

    It really is sad that marketing today has lead people to believe that it’s about the payment, not the total price.

    I didn’t know about this tech feature though. I wonder how many times it malfunctions and prevents someone who has paid on time from starting their car. This will bring a whole new system to the way people repo.

    • You’re so right about the predominance of the monthly payment these days Kalen. “If I can squeeze the monthly payment into my budget, I can afford the item I’m buying!” is what we’ve been coached to believe and, sadly as you say, many have bought into the sales pitch.

  • Travis Pizel

    I’m ok with the technology as long as there are the right rules of usage surrounding it. What’s needed more, however, is a revamp of the rules surrounding auto loans. People getting these loans for 7-8 years are likely not buying a new car….so the question is – shouldn’t there be some sort of calculation to see if the loan is going to extend past the average life of the car? If so, the loan shouldn’t be allowed – because if the car is past it’s usual end of life, and it DOES die, what is the motivation for the borrower to keep paying?

    • These long-term loans do seem like a disaster waiting to happen. I just hope the taxpayers aren’t left holding the bag, again.

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