Article

The "Consumer Wins" Argument For Starter Interrupt Devices

August 2006, Auto Dealer Today - WebXclusive

by Thomas B. Hudson, Esq. - Also by this author

Some things are intuitive. A baseball bat is intuitive – it isn’t too hard to figure out what to do with the thing.

Some things are not intuitive. How many of you who don’t have a 14-year-old living in your house have actually managed to set the clock on your VCR?

Intuitively, car dealers and finance companies operating in the sub prime arena believe that the use of starter interrupt devices is a good thing. They point to more cars sold, decreased collection activity, fewer delinquencies and lower charge offs.

When you ask consumer advocates about starter interrupt devices, however, their intuitive reaction is to say that the devices are bad. Bad for consumers, that is. But is that true? Let’s look at the ways the devices can actually benefit consumers.
 
The most basic benefit is that a consumer who has (for good reasons or bad) trashed his or her credit can buy a car on credit if the dealer’s ability to get paid is enhanced. A car often spells the difference between a job and no job, or between a good job across town compared with a not-so-good job on the bus route. Without the device, car credit, and the better jobs that go with having a car, it would be impossible for many of these credit-challenged buyers.
If the industry’s numbers are correct, the devices actually change the payment behavior of buyers with impaired credit. That changed payment behavior, if reported to the credit bureaus, will actually improve the buyer’s credit rating, paving the way for future credit purchases. It will probably also improve the buyer’s self-esteem, as well, but things like that are hard to measure.

The buyer’s changed payment behavior also reduces the dealer/creditor’s collection expenses and its losses from delinquencies and charge offs. Assuming that some part of that savings can be passed to the buyers, the devices create at least the potential for lower financing costs for those with severely impaired credit. Once the buyer has established a better credit record, future credit should be less expensive as well. Moreover, the buyer’s credit availability may expand to other types of credit previously unattainable, such as credit cards and housing finance.

Even for those buyers who are unable to get it together, even with the devices attached to their cars, there are benefits. If a buyer fails to make a payment on time and the car is equipped with a starter interrupt device, the car won’t start, but the creditor doesn’t send the tow truck out to repossess the car and tow it to the repo lot – billing the buyer for the repossession and storage costs. And the customer whose car is fitted with the starter interrupt device is spared the sometimes considerable inconvenience and indignity of trekking down to the repo lot to bail out his ride.

Will these points persuade the consumer advocates in your jurisdiction that starter interrupt devices are good for consumers? Perhaps so, perhaps not, but they won’t be persuaded unless the case for these benefits is made, and they won’t be persuaded unless these purported benefits of the devices are actual and not just industry smoke and mirrors.

That is why we urge dealers who use starter interrupt devices to do a few key things. First, the dealer should reward those consumers whose payment behavior actually changes when the devices are installed. If a dealer can show that a buyer benefits, either by more favorable credit terms in the initial credit sale, or by better terms on a subsequent credit sale, the dealer will defuse criticism of the devices. Likewise, if the dealer reports improving credit histories to the credit bureaus, providing a really tangible benefit to a buyer who deserves it, the dealer’s use of the devices will be harder to challenge. Finally, dealers who do not attempt to impose (sometimes) bogus fees and charges upon repossession can make the final argument above – that the consequences of nonpayment are less burdensome with the devices than without them.

Consumer advocates who are willing to listen might actually find these arguments in favor of the use of the devices to be persuasive. Even if the consumer advocates aren’t persuaded, though, these not-so-intuitive points may be worth making to legislators, regulators and other sometimes-hostile-to-dealers folks.

Comment

  1. 1. jay [ March 03, 2013 @ 06:53PM ]

    i lost cars ,friends,and customers because everybody promised to pay,and 3 months later the payments stopped,people were mad because the lost there jobs ,the holidays are here,all kinds of stories.i 'm left hold the bag or stealing my cars back from them after 4-6 months of them hiding,i think the interrupt is a good idea,i want them for my car lot.

  2. 2. jesse [ September 02, 2013 @ 05:15PM ]

    will a car still start but not move with a starter interrupt system, my car has one on it, my car will crank and go in reverse but it won't go in drive what could be the problem

  3. 3. Gemma [ June 13, 2014 @ 02:48PM ]

    These devices are good in some ways. I had a friend who had a 06 plate astra sri on finance 5th may 14, 18th may 14 car caught fire. Car total write off, fire brigade suspectec fire was caused by electrical device fitted under dash also known as starter interrupt device. Supplied & fitted bt finance company. Had this vehicle 14 days & still being expected to pay for it even though dont have it and there to blame for this incident. Luckily my family werent in this vehicle as they wouldnt have survives.

 

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