Payment assurance technology can improve collections and ease repossession if used properly. But it can also create problems for dealers when its not.
Ken Shilson, founder of the National Alliance of Buy-Here, Pay-Here Dealers, shared with attendees at the group's recent conference the results of a study on starter-interrupt and GPS devices.
More than 80 percent of the respondents said the devices lower the risk of default which allows them to sell higher value vehicles with less risk.
Problems using the devices arise when dealers don't disclose them. A dealer in Florida learned
that lesson the hard way when the state's attorney general sued him for unfair and deceptive practices when he failed to tell a customer about the GPS on his car.
Allen Douglas of iMetrick said dealers need an open relationship with their customers about the devices.
"It's not an adversarial relationship at all," Douglas said. "It should be seen as a positive."
After all, dealers are more willing to take a change on a customer if the car has a payment assurance device.
Shilson's survey found 85 percent of respondents disclose the device in writing. Almost all say the customers offer little or no pushback.
Attorney Tom Hudson said another way dealers get in trouble with the device is passing their cost onto customers. Hudson said the best way to handle the cost is treat it as overhead with the water and electric bills.
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