Miss a payment? Your car stops running

[fskimospy]

You guys realize that without these devices people wouldn't be getting a car loan at all, right?

 

[Bitek]

You guys realize that without these devices people wouldn't be getting a car loan at all, right?

Sure. But you also realize that there are a number of predatory car salesmen who intentionally "stuff" people into cars they know they can't afford just for the purpose of collecting some payments, repo-ing or buying back the car for cheap so they can resell it?

Can I see this as another tool to pull this off? A means to get people into things they can't afford? Absolutely.

These buyers are sometimes fools, sometimes just hardluck cases, but either way there is a strong possibility that the public as a whole will end up paying when the deal goes south. Who pays for the unemployment ins when they get fired for not being able to get to work?

I think we should have learned the danger of creating bubbles, esp in the subprime.

 

[highland145]

Sure. But you also realize that there are a number of predatory car salesmen who intentionally "stuff" people into cars they know they can't afford just for the purpose of collecting some payments, repo-ing or buying back the car for cheap so they can resell it?

Can I see this as another tool to pull this off? A means to get people into things they can't afford? Absolutely.

These buyers are sometimes fools, sometimes just hardluck cases, but either way their is a strong possibility that the public as a whole will end up paying when the deal goes south. Who pays for the unemployment ins when they get fired for not being able to get to work?

I think we should have learned the danger of creating bubbles, esp in the subprime.

No just the next set of borrowers or, possibly, the business could close. The rate is high because the default rate is high. There is no insurance for charge offs. Is there some predation? Sure but there are assholes in every industry.

Who pays for the unemployment ins when they get fired for not being able to get to work?

Employers pay the unemployment insurance. It's debatable if that $$ could be coming from the employees pocket.

 

[boomerang]

I see it now, a parent is behind payments due a child with significant health problems. During a medical emergency they try to take the child to a hospital in a desperate attempt to save the child life. The car stalls, and greedy bank shuts off the ignition at this moment. The parent is unable start the stalled car again because the greedy bank has condemned her and her child. Lives are in danger people.

A woman who couldn't pay her bills due to cancer, is trying to drive to her medical treatment. Her old car she got a loan through the loan shark bank, stalls on the freeway. She is unable to restart because the bank has condemned her. She is now stuck in the middle of a busy freeway. She is hit by another car who doesn't see her. Another life lost.

All of these stories could have happen.

I guess that could happen. I was thinking more along the lines of a meteor barreling towards Earth and as the mother and her children are about to take a side road to escape the path of the meteor their car stalls and they can't restart it due to the greedy loan shark bank. What's really bad about the situation is that the mother loses her life and she's carrying an unborn child that would have gone on to unite the world in eternal peace.

This is great fun. It kind of has me reliving my childhood when I invented elaborate but implausible scenarios when my mind turned towards make believe.

 

[highland145]

I guess that could happen. I was thinking more along the lines of a meteor barreling towards Earth and as the mother and her children are about to take a side road to escape the path of the meteor their car stalls and they can't restart it due to the greedy loan shark bank. What's really bad about the situation is that the mother loses her life and she's carrying an unborn child that would have gone on to unite the world in eternal peace.

greedy loan shark/

Man I sure hope the insurance was up to date.

/greedy loan shark

 

[Bitek]

No just the next set of borrowers or, possibly, the business could close. The rate is high because the default rate is high. There is no insurance for charge offs. Is there some predation? Sure but there are assholes in every industry.

Employers pay the unemployment insurance. It's debatable if that $$ could be coming from the employees pocket.

From the links:

It facilitates upsizing:

The industry says the devices are a public service. By encouraging prompt payment, the devices help consumers rebuild their battered credit scores, the industry contends. By reducing losses for lenders, it allows them to make bigger loans to borrowers so they can buy better cars.

Inconsistent rules:

Lenders must wait 10 days after a payment is due, then send a letter notifying the borrower of the default. They then give the borrower another 20 days to pay before taking action to enforce its contract. Ward said she never got a warning letter.

Companies such as Passtime supply the devices, along with software that lenders use to decide when to cut a customer off. But the actual cutoff decision is made by the lender.

According to the National Alliance survey, 14 percent start GPS tracking or disable immediately when a customer misses a payment, 30 percent have a short grace period, 54 use discretion and 1 percent use the devices only as a threat.

The lenders have a right to collect when in default, but needs to be done in a legally consistent way.

The lender has little incentive, other than loan losses, to enter into sound deals. The devices serve to reduce risk to the lender, but I am very skeptical that this actually reduces overall risk in the system, but rather just shifts it onto others. In effect this encourages a less sound financial system as lenders are decoupled from the negative effects of poorly made loans.

UI is paid by state govts, which is funded by dedicated employer taxes.

 

[fskimospy]

The lenders have a right to collect when in default, but needs to be done in a legally consistent way.

The lender has little incentive, other than loan losses, to enter into sound deals. The devices serve to reduce risk to the lender, but I am very skeptical that this actually reduces overall risk in the system, but rather just shifts it onto others. In effect this encourages a less sound financial system as lenders are decoupled from the negative effects of poorly made loans.

UI is paid by state govts, which is funded by dedicated employer taxes.

It definitely reduces risk overall as it increases the ability of a lender to recover assets from a failed loan. Finding a car to repossess can be really hard and very expensive. The car they get back will be worth less than what they sold to begin with, so they are definitely suffering losses.

I once knew a guy who bought a brand new mustang and literally never made a payment on it. He kept the dealer paper BS plates on it for more than a year and just didn't park in the standard places. They were searching for it for months and months to repossess it but they couldn't find the car. The only reason he lost it is that he parked in front of a fire hydrant and got towed for unrelated reasons.

 

[Bitek]

It definitely reduces risk overall as it increases the ability of a lender to recover assets from a failed loan. Finding a car to repossess can be really hard and very expensive. The car they get back will be worth less than what they sold to begin with, so they are definitely suffering losses.

I once knew a guy who bought a brand new mustang and literally never made a payment on it. He kept the dealer paper BS plates on it for more than a year and just didn't park in the standard places. They were searching for it for months and months to repossess it but they couldn't find the car. The only reason he lost it is that he parked in front of a fire hydrant and got towed for unrelated reasons.

Sew up the rules regarding the fair use of it and I am fine with it. Again, lenders deserve to recover unpaid for property in a responsible way.

Im sure there are devils on each side. I had a roommate back in college that did used car sales part-time/summer job. The things they encouraged him to do was insane. Wasn't just one dealer either, worked for a number of them before he finally quit after feeling so dirty.

I also worked in a dealer service shop too for a summer job. Highly enlightening, complete shark tank. Smiles upfront while picking your wallet. Old people were the biggest mark. So gullible and trusting meanwhile they were getting worked for inflated prices and BS solutions to minor issues.

 

[highland145]

From the links:

It facilitates upsizing:

Buying a better car is a downside for the customer?
Inconsistent rules:


The lenders have a right to collect when in default, but needs to be done in a legally consistent way.
The laws are clear here. If the lender isn't following them, the state can take their license. And we're required to have pamphlets on the counter detailing their rights. And the notice of defaults have to be sent certified mail. But like I said, there are assholes in every industry and there are magistrates that do whatever they like.
The lender has little incentive, other than loan losses, to enter into sound deals. The devices serve to reduce risk to the lender, but I am very skeptical that this actually reduces overall risk in the system, but rather just shifts it onto others. In effect this encourages a less sound financial system as lenders are decoupled from the negative effects of poorly made loans.
Of course loan loses are the incentive for the devices. Making $$ is why they're open not as a public service. Who are these "others" that you're talking about? Poor loan decisions affects the lender only not any financial system. There isn't a way that I know of to package these loans and sell them to the public like what happened in the mortgage industry.

UI is paid by state govts, which is funded by dedicated employer taxes. Yes and if the employee gets fired for a cause, they might not get any unemployment so that's not hurting the state or the employer. Here, if an ex employee gets unemployment, the employer's rate goes up and they pay more into the system.

See above.

What industry do you work in?

 

[MtnMan]

This isn't Europe. When I lived in Oklahoma it was 20 miles to the nearest town. No cabs, no buses and would you bike 40 miles round trip to get a loaf of bread?

Smarter people would get at least 2 - 3 loafs of bread if the went that far :biggrin:

Or make your damn car payments on time.

 

[Attic]

If it reduces risk (which it appears to do) it needs to also reduce interest % amount on the loan.

Otherwise scam to take advantage of sub prime borrowers and keep them paying super high interest rates despite risk being removed.

Car sales are now driven by sub prime, so this development is somewhat natural,.. how to stuff folks into expensive loans and then twist their balls for payment at the very high predatory rates.


Want car now mentality for high risk folks shouldn't be satisfied in this manner. Public transport your ass or save up the 2k-2.5k to get a decent used car. Anchoring these folks to debt loads and then twisting nutz for payment is the worst of American capitalism at it's finest. Eating these folks for lunch on high monthlies with high % interest rates and then turning off the car when they can't pay = BS. Sure it will work because of "I want now mentality" that is serviced by creditors, but if this device lowers risk it needs to lower interest rates on the loans being made to these folks. If it doesn't lower risk it's not worth anything, we know it lowers risk.

It's not a baseball bat to the knee, but it will still cause significant duress to get folks to cough up payment immediately. Lower the fucking rate if you're going to hold over them the threat to take the bat to their legs. Otherwise charge the high rate and eat the high risk like a good boy.

 

[squarecut1]

"I want now mentality" that is serviced by creditors, .

Not just I want now. It is wanting something bigger and more expensive than you need.

It is instructive to note that in the NY Times article criticizing this kind of loan practice, the three cases they mention all have vehicles that they probably do not need.

The 26 year old Oscar is driving a 2.7 Liter, 190 HP, V6, with 18 mpg gas milege, and that is for the smallest Magnum, don't know which one he is driving. It could be even bigger one and worse mileage. He is ticked off that the shut off device messed up his movie date. Does Oscar really need something this big? By what definition of the word is this vehicle a necessity?

 

[smackababy]

Even with the disabled starter, the risk isn't removed. There is more incentive to pay, but only by penalty of loss of the use of the product.

And, I'm sure, as with most lenders, if you actually can't pay due to some kind of emergency (and, buying that new TV for the big game, isn't one), they will work with you and give you an extension before shutting off the car.

These people didn't get bad credit by accident. They have yet to demonstrate their ability to make responsible financial decisions, which includes on time payments. If there is no consequence for paying late, those who don't have the will to do it on their own, won't.

 

[Attic]

Even with the disabled starter, the risk isn't removed. There is more incentive to pay, but only by penalty of loss of the use of the product.

And, I'm sure, as with most lenders, if you actually can't pay due to some kind of emergency (and, buying that new TV for the big game, isn't one), they will work with you and give you an extension before shutting off the car.

These people didn't get bad credit by accident. They have yet to demonstrate their ability to make responsible financial decisions, which includes on time payments. If there is no consequence for paying late, those who don't have the will to do it on their own, won't.

It doesn't remove risk, it reduces it. Otherwise largely agree with your thoughts here.

More high % debt is not the answer to poor borrowers, sheparding in this crap into these folks lives through shutoff devices on items they may not be able to afford otherwise,... doesn't seem like a great benefit of our society.

Debt is the anchor in many of these folks lives. I've little patience for those ignoring the larger, in plain sight, issue here.

 

[squarecut1]

They have yet to demonstrate their ability to make responsible financial decisions,

And even with this kind of loan, they still haven't made responsible financial decisions. See posts

http://forums.anandtech.com/showpost.php?p=36757704&postcount=112

http://forums.anandtech.com/showpost.php?p=36757729&postcount=113

http://forums.anandtech.com/showpost.php?p=36758825&postcount=137

 

[werepossum]

Need those flying cars even more these days.

If they are Repo'd, could just use em as drones

The flying car will fly itself back to the dealer and impound itself with you locked inside. Problem solved.

Subprime is such an ugly word. How about credit challenged?

The loan business made my old boss a lot of $$ but adding the buy here/pay here has made him significantly more.

Cow-orker had a perspective son-in-law who owns his own buy here pay here lot after working at several and he spilled the beans. Whatever he has in the car is the down payment; the actual payments are profit.

If the above sounds harsh to the foamy crowd, remember that profit on that car has to pay not only the owner but the employees, rent or taxes, utilities, miscellaneous required purchases, etc. Only a small portion of each car's profit makes it to the owner's pocket.

Shit can happen to people that they have absolutely no control over, we used to have unions that helped out when corporate greed set in and certain people who stayed at a job for a long while get kicked to the street, I know about this first-hand and it's about the lowest form of scumbaggery there is. At least my car is paid for thank god but it sucks at 50+ yrs old trying to re-invent yourself or compete in the job market with those that are 25 years younger than you. I used to wonder why someone would ever walk into a former employer and start shooting people, I don't wonder anymore..

Quite true, but if you ordered your life properly then credit should not be a major problem. Where many good people get screwed is three-fold, the first being situations like the 2007 crash where the reasonable assumption that another job can be found turns out not to be true. Another unavoidable situation is when illness, injury or death changes the game. Sounds like you got caught in the third, where structural societal changes take what you thought was a secure job (or at the least, a secure marketable skill set) vanish. Any of these can take someone whose life seemed to be on track and wreck them completely as they find that the income they took for granted is not replaceable in any reasonable time frame.

That's kind of a different question though. The small business owner that sells you the car is facing the same problems. He ain't yo daddy, and if you sign a contract to get a car, you need to honor that contract. (And I doubt you disagree with that.)

 

[highland145]

It doesn't remove risk, it reduces it. Otherwise largely agree with your thoughts here.

More high % debt is not the answer to poor borrowers, sheparding in this crap into these folks lives through shutoff devices on items they may not be able to afford otherwise,... doesn't seem like a great benefit of our society.

Debt is the anchor in many of these folks lives. I've little patience for those ignoring the larger, in plain sight, issue here.

Most people. Too much house, car, vacation, ....I could not have paid for my wife's masters if we had a lot of debt. She could not have supported us while I opened my business if we had debt other than a modest house payment. I may lend for a living but even I tell my customers "debt free is the way to be."

 

[Hugo Drax]

lol - a necessity? Are you fucking kidding me? At what point do you lefties stop with this whiny bitch stuff?

Leftie, shit he is beyond leftie and has gone into plaid.

 

[squarecut1]

Most people. Too much house, car, vacation,

That is the American way.

 

[highland145]

Cow-orker had a perspective son-in-law who owns his own buy here pay here lot after working at several and he spilled the beans. Whatever he has in the car is the down payment; the actual payments are profit.

If the above sounds harsh to the foamy crowd, remember that profit on that car has to pay not only the owner but the employees, rent or taxes, utilities, miscellaneous required purchases, etc. Only a small portion of each car's profit makes it to the owner's pocket.

Sub $1500 cars, auction price. Above that and you can't recoup the cost because they can't come up with the down payment...Tax time (EITC) being an exception.

 

[werepossum]

What difference it matters if you wake up and need to go to the hospital and someone repo'd your car cause you was late or if they instead shut it off remotely. Either way you may die. We should discuss every possible combination of scenario's by the thousands until we uncover a solution....oh that's right, we won't find a solution outside of just pay your damn bill on time like a responsible adult and stop blaming everyone else.

That's why we have ambulances. Everyone knows this.

We need to place high priority in protecting access to the what are the real necessities. People should have a fundamental right to:

Internet at least 2Mbs
Electricity
Water
Good Food
Gas
Transportation (This often includes a vehicle)
Telephone
Shelter
Periodic Entertainment (the minds needs to enjoy, in order to thrive)

This car is basically part of transportation, and with it comes access to many of the other fundamental necessities.

Going through life as nothing more than appetite married to entitlement is sad, dude.

Sure. But you also realize that there are a number of predatory car salesmen who intentionally "stuff" people into cars they know they can't afford just for the purpose of collecting some payments, repo-ing or buying back the car for cheap so they can resell it?

Can I see this as another tool to pull this off? A means to get people into things they can't afford? Absolutely.

These buyers are sometimes fools, sometimes just hardluck cases, but either way there is a strong possibility that the public as a whole will end up paying when the deal goes south. Who pays for the unemployment ins when they get fired for not being able to get to work?

I think we should have learned the danger of creating bubbles, esp in the subprime.

If only consumers had some way to control what they buy. Sadly, that is but a pipe dream, and the reality is we are but slaves who must accept whatever people wish to sell us, having neither spines nor minds.

 

[werepossum]

Sub $1500 cars, auction price. Above that and you can't recoup the cost because they can't come up with the down payment...Tax time (EITC) being an exception.

Mostly. Settlements are another source of customers for the higher priced cars, but the bread and butter are the sub-$1500 to $2,000 down payment.

 

[highland145]

Mostly. Settlements are another source of customers for the higher priced cars, but the bread and butter are the sub-$1500 to $2,000 down payment.

Had a customer that got $50K for some settlement. She bought a $35K toyo sequoia....... She comes to me after she pawned the title for $3K at 200%.

Truth on the bread and butter.

 

[momeNt]

There are people who engage in what is called "hyper-mileage" driving, which involves shutting off the car while it is moving in order to conserve fuel. I have hyper-mileaged both eastwards and westwards down the Cascades when travelling cross country for almost an entire hour. So I guess when I go to restart my vehicle I can't and I'm dead?

That's awful.

 

[Rakehellion]

Sure. But you also realize that there are a number of predatory car salesmen who intentionally "stuff" people into cars they know they can't afford just for the purpose of collecting some payments, repo-ing or buying back the car for cheap so they can resell it?

Can I see this as another tool to pull this off? A means to get people into things they can't afford? Absolutely.

These buyers are sometimes fools, sometimes just hardluck cases, but either way there is a strong possibility that the public as a whole will end up paying when the deal goes south. Who pays for the unemployment ins when they get fired for not being able to get to work?

I think we should have learned the danger of creating bubbles, esp in the subprime.

Predatory lending is bad. But some people wouldn't be getting cars at all without these things.

I see no problem with the device itself.