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 
What method could possibly used to allow the consumer to operate the vehicle in case of an emergency (e.g. to get to the hospital) but not otherwise?
There would have to be some sort of human on the other hand making split decisions: Does situation X qualify as an emergency? How do I know that this person is really in situation X and not lying to me?
Man, I would hate to be the person on the hook for making the wrong decision and denying someone access to transportation in a true emergency.
Speaking of credit cards, I have to chuckle at the implied blackmail the credit card companies are issuing; that they won’t be able to give out new credit if the government regulates what they can charge, and how they conduct their business.
I say the US Government should issue low interest credit cards to everyone in the country who has a good credit score, or who has never missed a payment with their existing creditor.
To insure against losses, they can do like they do with student loans, and dock pay or tax refunds until it is paid back.
That would effectively eliminate the credit card as everyone rightly defects from Citi, Chase, Advanta, Cap One, BofA and all the other swindlers who are screwing with people’s livelihoods.
Mike hit this dead on. The customer for this product is the Buy here/Pay here type used car dealer. People who must go to one of these often don’t have any choice and a dealer who does implement this technology can probably charge slightly lower rates because their loan is more secure. People who are that hard up for a source of credit will often accept terms that people with more flexibility would refuse outright.
I just bought a house, and I read and understood everything I signed. Yup, sure did.
A lo-jack type system in every care seems to make a lot more sense to me. Although I have no idea if their costs are even remotely similar.
YES!
Incentives!
there even is an alarm clock that donates money to a charity you really don’t like every time you hit the snooze button!
Sounds great, a customer service rep in Springfield pulls up the wrong account and suddenly my paid-in-full car stops working with an infant and toddler in tow.
Heaven forbid the master server fails: national gridlock.
I suppose the idea has some merit. Having a pool of cars and a pickup truck or two (but no personal vehicle) would be great. This would be a way to ensure that the car gets back to the barn. But a kill switch would be problematic.