For Some High-Risk Auto Buyers, Repo Man Is a High-Tech Gadget

Rashida Redd punched in a six-digit code in her Pontiac Grand Prix and got a new lease on life.

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 from Williams Pre-Owned of Limerick on the condition that it have a starter-interrupt device.

“At least I was able to save the house,” Redd said.

The cigarette-pack-size device, mounted under the dashboard, flashes green if she has made her car payment on time. 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, according to the device manufacturers.

Ken Shilson, managing partner at Shilson Goldberg Cheung & Associates in Houston, an accounting firm that works with auto dealers who use the device, says the market is growing.

The major manufacturers report double-digit sales increases so far this year over 2005. An estimated 1 million of the devices are in use today, Shilson said.

Consumers with poor credit often face interest rates of more than 20% -- nearly triple the rate that drivers with good credit can get, Shilson said. 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.

Redd’s car is equipped with a device made by Payment Protection Systems Inc. of Temecula, one of three manufacturers that dominate the market. The others are PassTime in Littleton, Colo., and Pay Technologies of Cleveland.

The companies make variants of the same device. The unit is connected to the starter and emits a brief series of sounds or flashes of light days before the payment deadline. If the customer then makes a timely payment, he can contact the dealer for a new code that will allow him to operate the vehicle. Some devices are remotely controlled by dealers.

Devices typically are mounted under the dash or hidden in places such as a glove compartment.

Manufacturers say the device won’t kill the engine while a car is being driven. It will only stop the vehicle from starting. Also, customers who are late on their payments are allowed emergency starts, the companies say.

Shilson said the 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.

Jack Gillis, a spokesman for the Consumer Federation of America and author of “The Car Book,” doesn’t like the idea of someone else having control over a driver’s vehicle.

“It’s a rather draconian measure to take,” he said. “What these companies are able to do is sell cars at virtually no risk to themselves, with all the risk to consumers.”

But Auto Trakk of Montoursville, Pa., Redd’s lender, said the device allowed the company to consider serving even the riskiest customers.

“It enables us to look at lower credit scores,” marketing manager Denny Sullivan said.