AOL Autos has a great article on new technologies that shut off your engine if you fail to make payments on your car loan.
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.
Sounds like a good idea to me. But then again Barry Nalebuff and I got into trouble a few years back defending Acme Rent-A-Car (its real name) for automatically penalizing renters $150 if (GPS showed) they drove the cars faster than 80 m.p.h.
Both technologies are examples of commitment devices, which help drivers commit to particular behaviors. Both should only be used with abundant ex ante disclosure so that the drivers know what they’re signing up for.
One concern with the financial cut-off switches is that they might leave a driver high and dry when she really needs the car — say, to drive to the hospital in an emergency. But the AOL article says:
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.”
(Hat tip: Steve Salop)
and 
. You can also watch it on 
Method for bypassing the shut-off switch available online in 3, 2, 1…
I’m not sure exactly why this is new, except for the telematics angle. A dealer near Detroit got in hot water for doing it — although not by remote — about 10 years ago.
http://findarticles.com/p/articles/mi_hb5251/is_199911/ai_n20129900/
What’s next, a device that burns down your house if you miss a mortgage payment? A device that kills you if you default on your credit card?
Unless you can convince the whole auto industry to implement this rule, you probably don’t want to be the first. Why would I want to buy a car or get a loan from you if your policies are against me?
Wow, this will sure stick it to those jerks who lose their jobs and waste their money on groceries for their kids instead of paying the 27% interest that the kind people at SubPrimeAmerica gave them. I mean, if they didn’t want to get stranded after several days of financial hardship, why didn’t they just move to a city with decent public transportation? They’ll sure learn their lesson while they’re walking to job interviews!
Fred – it’s probably trivial to bypass it, but I’m sure that the device also phones home periodically, so if you bypass it, it will know and tell the lender. Then through the magic of GPS, they know where you are and come get you. It’s more of a convenience device for the lender than an actual hard-to-bypass enforcement device.
I’m sure within weeks talented hackers will figure out how to mimic the dealer’s remote control signals so they can get in on the disabling fun as well. Remote kill switches on devices are always a Bad Idea.
“Unless you can convince the whole auto industry to implement this rule, you probably don’t want to be the first. Why would I want to buy a car or get a loan from you if your policies are against me?
- haoest”
It will probably be first used in the used car industry with customers who have no other choice.