Tuesday, June 13, 2006

What Will You have to Blow to Drive?

To start your car?

Some habitual drunks must install court-ordered blood alcohol devices in their cars that test their BAL before the car will start. In the name of increasing target demographics, some loan dealers are offering a similar mechanism to those with bad credit. From Economist's View:

High Risk, High Tech Loans

Starter-interrupt devices are beginning to be used in risky car loans. If a consumer falls behind in making payments, the car won't start. In this case, technology is doing two things. First, it is displacing labor. With these machines, "Repo Men" are no longer needed, at least not in the same numbers. Second, it is reducing the risk of loans in the automobile market which enhances its efficiency:

For Some High-Risk Auto Buyers, Repo Man Is a High-Tech Gadget, LA Times/AP: Rashida Redd punched in a six-digit code in her Pontiac Grand Prix... The 34-year-old Pottstown, Pa., mother of five had to file for bankruptcy protection about a year ago in the face of mounting medical bills from her husband's open-heart surgery.

Despite her poor credit history, Redd was able to lease the 3-year-old car ... on the condition that it have a starter-interrupt device. ... The cigarette-pack-size device [is] mounted under the dashboard.... If she misses her $94 weekly payment, it won't let her car start.

Starter-interrupt devices are becoming a popular way for lenders to ensure that they get paid, and consumers seem willing to accept them to get into nicer cars, use a smaller down payment and qualify for a lower interest rate... Consumers with poor credit often face interest rates of more than 20% — nearly triple the rate that drivers with good credit can get... They also have to make a down payment equal to 10% to 20% of the car's purchase price, while buyers with good credit can buy a vehicle with little or no money down. ...

[T]he devices were mainly geared for the "buy here, pay here" market — consumers with the lowest credit scores. Typically, these buyers have filed for bankruptcy protection or had a repossession. "Buy here, pay here" customers also are limited to how expensive a car they can buy, typically no more than $5,000...

Where else could these be used? Home appliances such as washers, dryers, and refrigerators that won't function if payments are missed? Something about this feels intrusive, but I can't think of any reason to oppose it since it would allow more people to purchase these items on better terms.

This will probably average out to be a good thing, but what stands out most distinctly is how technology is creeping into more and more private areas of our lives... and being readily accepted. Many people seem genuinely willing to trade a privacy or priviledge.

I see a lesson here: There's a reason they don't bait traps with vinegar.

Sure, given a "lower" interest rate, the privacy invasion almost seems worth it. But later, when these devices are "accepted" by more people, interest rates will go up to where they are now.

The arguments for the trade in privacy will have evaporated and for this demographic, getting a car without the starter-killer will be nearly impossible.

Will the trade be worth it then?

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