Engine-shutoff device gets drivers to pay loans on time
System helps buyers with credit problems
Automobile dealers like Michael Doucette say they have found a way to make sure consumers with poor credit make their payments on time.
Doucette, the co-owner of Searle ECT Auto Sales in Revere, says he installs an engine-shutoff device in the car that alerts the driver when a bill is coming due. If the bill doesn't get paid on time, the device triggers a kill switch that doesn't allow the engine to start.
Doucette said the engine-shutoff device allows him to sell cars to drivers he would normally have to turn away, including foreigners with no credit history and people who have jobs that pay in cash.
''People come in the door and can't get a car loan and can't get a cosigner," Doucette said. ''What do I tell them, to go get a bus pass? We're in a tough economy. People don't have a lot of money. They need cars."
Payment Protection Systems Inc., the privately held company in Temecula, Calif., that manufactures the engine-shutoff devices, says it has sold more than 200,000 of them since 1999, and sales are growing 40 percent a year.
More than 1,500 dealerships across the nation are using the On Time devices, including eight in Massachusetts and 10 throughout the rest of New England, the company said.
Mike Simon, chief executive of Payment Protection Systems, said the device isn't meant to be punitive. He said drivers unable to obtain financing or forced to pay astronomical rates for a loan are often able to strike a much better deal if they agree to have the shutoff device installed in their cars.
''We're here to help you, not to shut you down," Simon said. ''We help people continue driving and help them get better interest rates and cars."
Simon said his On Time device has been installed in everything from a Mercedes-Benz to a Ford Taurus. He said drivers aren't stigmatized by the units.
''These people know they've had financial trouble," he said. ''It's not a secret to them."
The device, which costs about $250, is typically installed just under the steering column. The keypad on the device flashes the number 3 three days before the next car payment is due and then the number 2 two days out. On the last day before payment is due, the number 1 flashes and a beep sounds.
At the end of the third day, if a payment is not made, the engine is disabled. It won't shut off while driving, but once the vehicle is turned off it won't restart. Codes are available in case a payment is not made but the vehicle owner has a temporary emergency requiring the use of the car.
Drivers who make their scheduled payment receive a six-digit code that they punch in to extend the driving period for another billing cycle. It's basically a pay-as-you-go car.
Doucette said he owns 10 of the On Time devices and six of them are installed in vehicles right now. He said he plans to buy 10 more when all of the devices are in use.
Simon said the device helps change drivers' bill-paying behavior, helping them set their spending priorities.
According to CNW Marketing/Research in Bandon, Ore., 27 percent of drivers with poor credit fail to pay their bills on time and 15 percent end up having their vehicles repossessed. The research company says approximately 3 percent of so-called subprime drivers skip town and can't be tracked down.
Car owners with the On Time device in their vehicles do a much better job, according to CNW. Only 3 percent fail to pay their bills on time, 3 percent end up having their cars repossessed, and less than 1 percent skip town.
Bruce Mohl can be reached at mohl@globe.com. 