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    by: Gary Hoffman | AOL Autos
     

    With consumer credit ratings plummeting, more American car owners could soon be driving around with an electronic Big Brother on board.

    Business is booming for makers of shut-off devices, which turn engines off when car payments are late. Sales at one manufacturer, Littleton, Colo.-based Passtime, are up 33 percent over last year. CEO Stan Schwarz says the company is cranking up production to meet the demand.

    "Right now, we are moving about 2,000 units a month into the marketplace," Schwarz says. "I fully expect by the end of the year we will be up to 14,000 to 15,000 a month,"

    While the devices have mostly been used in the subprime auto loan market, other lenders are looking closely at the technology, manufacturers say. It's no mystery why interest in the gadgets soaring: the creditworthiness of American consumers is declining as they lose jobs in record numbers and find it harder to tap into home equity.

    Financially stretched consumers have to figure out what bills they are going to pay -- and what payments they have to postpone. And car dealers and lenders want to make sure it's not loan payments that fall to the bottom of the pile.

    Consumers could increasingly find themselves in cars with shut-off devices if their credit turns bad and they are forced to shop at dealerships serving the subprime market. These sellers range from small mom-and-pop, "Buy Here, Finance Here" outlets to major dealerships.

    According to Schwarz, industry statistics show that 300,000 consumers a month are falling from "A" to "B" credit -- meaning that they have recently been late with a house payment and had other credit problems. Others have fallen lower, becoming candidates for subprime car loans for the first time in their lives.

    It's not an especially nice place to be. Buyers usually end up paying more than they would pay for a late model used car or a new car lease if their credit were good. Since the risks are higher, dealers and finance companies feel they have to hedge their bets by boosting interest rates to 27 percent or more.

    The devices, which are required by a growing number of subprime loan contracts, are the product of a revolution in telematics -- the blending of telecommunications and wireless technology.

    The devices are usually controlled remotely by the dealer or lender and are linked to the vehicle's powertrain. They usually cut out the power several days after the payment is due. Before the deadline, the driver is treated to a concert of tones and flashing indicators signaling that the deadline is approaching. There are also warnings after the deadline has passed.

    Their proponents call the devices a win-win for consumers and finance companies. They make it possible for dealers to sell cars to people who would have a hard time getting a loan otherwise. The buyers end up paying a somewhat lower interest rate because the risk to the lender is less.

    The products also include global positioning, or GPS, to speed up the repossession of the vehicle, if necessary.

    Not all the uses of the technology are related to subprime lending: Schwarz said his devices also double as anti-theft measures, making it possible for the consumer to track a stolen vehicle on his own on a computer.

    General Motors has introduced a feature using similar technology that enables law enforcement to track a fleeing car and slow it gradually to idling speed when the situation warrants.

    The devices used in the subprime market have spawned lively debates about their value and appropriateness, along with Internet chatter about how to disable them -- a move sure to send the repo teams into action. There have been a few lawsuits and scattered complaints about devices shutting down the engine while the owner is driving. Manufacturers attribute the incidents to mechanical problems unrelated to the devices.

    Numerous safeguards are built-in, the manufacturers say. The devices won't shut down the engine while the vehicle is moving, and consumers can extend the car's operation in an emergency. Contracts spell out that the device is present on the vehicle. "We have customers sign a disclosure before they get into the car, saying the unit is on the car and how it is going to function," Schwarz said. "The disclosure form is four or five pages long, and the customer checks off every box.

    "If the dealer won't disclose the unit is on the car, then we won't do business with that dealer or his lender or finance company," he said. But the entire system may break apart if dealer doesn't sell a good vehicle, he added. Some customers simply won't make the payments if a vehicle doesn't run reasonably well.

    One device, called the On Time, is produced by Murrieta, Calif.-based Sekurus, Inc. CEO Don Lavoie says he joined the company because it was on the verge of going mainstream. He compares the concept to payment plans for cell phones -- people pay on time because they don't want to see their service cut off.

    The device basically leads customers to push car payments up their bill-paying hierarchy. "Families across the country, regardless of their financial condition, move the bill to the top of the queue for payment if they need that phone for its basic utility, such as arranging to pick up the kids from soccer or school.

    "There are 300 million active cell phone users in the United States, and those people are paying their cell phone bill on time," he said. "And the reason is they can't use the phone if they don't pay for it."

    As the economy deteriorates, the shut-off devices seem to be coming into their own. "We have several credit unions that won't finance a car without it," Lavoie says. "They are financing high-quality used cars to non-prime buyers" -- a category that includes both subprime and some other financially challenged segments. A typical member of this group might be described as someone with less-than-stellar credit.

    The potential for the market is huge. "There are 40 million used cars sold a year, and 20 million are considered non-prime," said Lavoie.

    Schwarz at PassTime is sees similar potential for his products. "Right now we are even talking to national lenders who have "A" credit customers. They would leave the device in the inactive mode unless the customer defaults."

    The flexibility of the PassTime devices could accelerate their progress into the mainstream, he says. They can be reset for new payment schedules if owners run into a problem, giving them extensions of a few days at a time if the buyer can only afford to make partial payments. In the meantime, the borrower and lender could conceivably work out a new payment plan.

    In one more example of how cars are developing minds of their own, GM recently introduced its "Stolen Vehicle Slowdown," as an option on a number of models, including the Cadillac Escalade and the Chevrolet Silverado. The automaker is in the process of making it available on all its model lines.

    If the vehicle is stolen, customers call OnStar, and its staff locates the vehicle using a GPS device and then gives police the location, says James Kobus, a communications manager at the company. "If the police start closing in, and they notify us that the conditions are right, we can slow that vehicle down." A light on the instrument panel signals "Engine Power Is Reduced" and the car idles down to about three miles per hour.

    Read More About Smart Consumer Car Buying:

    - New Rules of Car Buying
    - How to Negotiate Auto Financing
    - How to Buy a Car Without Negotiating

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    1 - 20 of 175 Comments
    bcfrmkc816 Oct 22, 2010 7:40 PM
    i have a vehicle with one of these passtime as it is called and do not mind but my only concern is what if i have to travel to a state that is not listed on the papers will it still work or not i have asked the car lot and have emailed them because i also have to notify them when i move which can be often as i am in the military does any one know? i got nothing out of the company that i emailed also.
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    swtscorpio75 Jan 03, 2010 3:17 PM
    Yes the device can be removed from the vehicle or disabled after the loan has been paid off. If you read the contract concerning the device when you purchase a vehicle, you will see this. If the contract isn't clear in stating that the device can be removed or disabled, simply ask the sales person. They also have the option in the contract for you to leave the device enabled, for your own protection on your vehicle, for a small monthly fee to the originating compay that operates the device. This device also gives you a break on insurance premiums, as it's considered an "anti-theft" device. Yes it does give warning by a red blinking light installed on the dash near the windshield(typically), and anytime you turn the key on you will here beeping for about 5 seconds reminding you that your payment is late/due.
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    kbvp625 Nov 23, 2009 11:18 AM
    My question is if the loan has been paid off does the loan company remove the device? I think that they should. I also believe that this will open a new market for buying your next car for cash.....this will eliminate the problem of having this neat little device entirely! There should be an affidavit proving that this device is not on the vehicle when it is being purchased for cash and if the loan company/dealer has not done this and by some act of god the vehicle does become inoperable because of the device not being uninstalled then they should have to pay the owner any and all expenses incurred plus something for hassle of having to deal with the problem that should not have happened in the first place. If the finance company has these to protect themselves then the same should be in place for the consumer. What's good for the goose is good for the gander!. To comment on the issue of mechanical problems, I have had cars checked by a reputable mechanic only to have to replace a transmission within a few months of purchase! Sometimes s**t happens! I was fortunate and the loan company did help me out in this situation. The dealer replaced the transmission at the request of the finance company and reworked the loan for me. I was very lucky!
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    sskidd1143 Jul 18, 2009 2:23 PM
    Sorry if a repeat, but if they can turn your car off becuase of delinquent payments, why not turn off cars with no insurance, thus saving the 'uninsured motorist" charges on our policies?
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    newtownhood Jul 07, 2009 4:32 PM
    I've installed these for several used car lots. They don't shut your car off while driving, so I don't see it as a safety hazzard. Would you rather have your car not start, or repoed? This is not "Big Brother" like these morons have been suggesting. This is a contract between 2 parties that one party is not fulfilling their obligation. Pay your bills or lose your car. Pretty simple. "Big Brother" does not care that you spend a quarter of your paycheck on porn sites and ********* lines or crack, so you can't pay for your car. And yes, you're supposed to buy a car that you can pay for with one week's salary, or 1/4 last time I checked. They just want you to pay your bills and be a decent citizen. Don't buy things you can't afford. We all want to ride phat whips, but don't buy a 300M if you can only afford a KIA. The Kia with get 25+mpg on regular vs. chrysler getting 15 mpg(if you're lucky) on premium. If you drive alot, that could be the money difference in making your payment or not. As far as they're concerned, If you're more than 2 weeks late for your payment, you probably aren't paying. Banks and cardealers were tired of getting burned by deadbeats so this was the solution. You all hate car salesman, but imagine if there was only a lot filled with cars and fixed prices with no haggling involved? The salesman is also more likely to get you financed if you have no credit. No credit doesn't mean you're a bad creditor . Maybe you just always paid cash? Maybe "Big Brother" doesn't know about the "cash job" you have that doesn't give you a financial history, but you can easily make your payments. The "devil" carsalesperson is more likely to understand, and work with you. Also, it's a good idea to get a car checked out by an independent shop that you found prior to purchase. Isn't it worth spending $50 on your new potential investment? Then you can't claim you can't make your payment on your car because you blew the $2k transmission up in the first week you owned it.. Car salespeople aren't mechanics. They sell what's given to them. You can't blame them for selling you a crap car. You should blame yourself for buying a crap car. Point is: Buy a car that you had checked out, that you can afford, don't abuse it, give it regular maintanence ($15 oil changes and $100 brake pads are cheaper than $2500 engines and $1k full braking systems), and pay your bills. I don't see where the confusion is. If you can't pay your bill, make sure your cell phone is working so that when your car is shut down, you can get a ride or a taxi...or get comfortable shoes :)
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    agoela Jun 28, 2009 8:29 AM
    The device also lets you know in advance that a loan payment is due in a few days, so it is giving you notice and if you do not send the loan payment, then its your fault, you purposely ignored paying the loan or at the very least letting the loan company know you will be slightly delayed in sending the next payment. You can not blame ANYONE that your car is shutoff just because of the warning that is supposed to happen a few days before its due. Saying that you did not notice it the first time may work, but if it become hibitual then they know that you are just using that excuse to delay the payments and will disable the vehicle the next time.
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    agoela Jun 28, 2009 8:24 AM
    Another thing, for loan companies it will be a lose/lose situation. People will complain if they need to have this device in their cars and some people say don't loan them the money, then people will complain that they are not getting a fair shot because companies are not loaning them the money to purchase a car.
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    agoela Jun 28, 2009 8:18 AM
    @punnster - Do you think because the car was stolen under your use, that you will not have to pay for the car? Its not your car to begin with until you pay off the loan, so if the car is stolen and you attempt to stop payment then they will go after you to pay for the rest of the loan and if you stop paying they will tack on late payment charges on which will hike the cost of the car. I think everyone does not understand of the concept of a car loan. The car is not yours to begin with. The loan company is letting you borrow THEIR car until you pay off the loan in which then you do own the car. Until they they will make every attempt to get what is owed to them. Many people are also saying that loan companies are being stupid because if they disable the car then you will miss work, get fired and will not be able to pay the loan. That is just not true, what if the car was repoed? You would be in the exact situation that you are in when the car is disabled. Same thing in regards to emergencies, but if you call them to explain the emergencies, they may have a heart and enable it to do what you have to. As long as you understand that the loan is as important as all your other bills they can work with you, but if you ignore it then your the only one to blame. They will think if you don't care about the loan then you do not care about the car.
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    cofchas Jun 28, 2009 6:11 AM
    This is just another way for the government to be in your life. They will know when and what you’re doing all the time. This is nothing more than the government trying to inhibit your movement. Just wait until they use this to tell how many miles you drive each day. Then they can come up with a heavy &*********************&*****************; for you because you drive too much. This is crap!!!
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    ssijvm Jun 28, 2009 5:54 AM
    How stupid can you get? Turn off their car so they can't get to work on time and get fired, so they go bankrupt? Who is the idiot that thought this one up? First off the banks and credit companies should create an insurance policy that will pay off the loan if someone loses their job. This would end all the problems. Banks and finance companies just want to make everyone a slave to them. Why not just make everyone a slave and the masters can take care of them. Everyone needs to read Paul Zane Pilzer's book on Unlimited Wealth. There are different answers for this and putting electronic keys in cars is not one of them..
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    cheapshotfilm Jun 28, 2009 5:38 AM
    If a woman is raped or killed in a bad neiborhood because so credit company left her unalbe to drive out they should be an accesory to the crime. if some guy dies of a heart attack in his garage because his car won't start to get him to the hospital they should be charged with 3rd degree murder. if you stood in that garage and took their keys so they couldn't drive you would! they should not be exempt from the conciquences of their actions.
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    zlg43 Jun 28, 2009 5:01 AM
    Are any of these companies that make this device traded public on the stock exchange? Seems to me a great investment opportunity.
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    dngermouse1968 Jun 28, 2009 4:42 AM
    its great until the courts get together on this system and they turn off your car for unpaid parking tickets or unpaid taxes , child support, registration, or whatever they feel like passing a law to include this option for.
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    mrarmer Jun 28, 2009 4:33 AM
    Too much Technology give me my 1969 Ford no tech and lots of power
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    ycav4424 Jun 28, 2009 4:13 AM
    They will put them in our hearts next. Pay up or get shut off.
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    svizcar Jun 28, 2009 4:00 AM
    Used older cars will more than likely be the way to shop from now on.
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    scorcher66699 Jun 28, 2009 3:51 AM
    Just what we need, another way for "them" to make our lives more difficult!
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    bockslim Jun 28, 2009 3:50 AM
    i can just see it now , they turn off the car and the steering locks up while your driving.
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    punnster Jun 28, 2009 3:49 AM
    No problem. If someone steals your car, call the dealer and tell them you have stopped payments.
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    hawk173rd Jun 28, 2009 3:44 AM
    Its stories like this that help give dealers a bad name. Its been my experience that it is the finance company that requires these things to be put on cars that they finance, usually because the buyer already has a credit problem but they are willing to give them a chance.
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    Consumers could increasingly find themselves in cars with shut-off devices if their credit turns bad and they are forced to shop at dealerships serving the subprime market.
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