Skip to content

Understanding Black Box Car Finance

  • by

The finance sector for cars could be entering its most revolutionary phase to date. In the last decade it has totally changed the way we purchase cars and the amount we can afford. In a series of innovative new products such as pay As You Go Finance for cars is just the most recent. Can it live up to the initial praise given to it?

Leveraging from Insurance

Pay as you go could be a brand new concept. However, it’s not really an innovation in terms of technology. Insurance firms have used it for a long time and have seen great results. In recent times, however it has also been increasingly popular as a finance tool.

The Pay As You Go Car relies on a small , black box which is fitted to the front of your vehicle. This box is capable monitoring where and when you drive. The idea was to enable insurance companies to track the driving habits of their customers and ensure they were adhering to the guidelines set out in their contracts. Inexperienced, young drivers for instance, might not have been permitted to drive in the dark and the black box could verify their compliance.

A little change, the exact device is now able to be used in the finance industry, too.

What is the Pay As You Go Car finance function?

The black box redesign to facilitate Pay As You Go Car finance, is similar to one used by insurance firms. The process is a bit different however.

Instead of observing your driving habits the system simply regulates your monthly payment plan. At the end of each month, you pay the interest rate. Then, in return you be given an e-mail with a number. In that black container, it grants you the right to drive the vehicle for another month.

If you don’t manage to pay the amount then you’ll not be able to get an additional activation code. This means that this black-box will notify you, and then deactivate your vehicle. You won’t then be allowed to drive until you pay the amount and receive a new one.

Who are they intended for?

The Pay As You Go Car finance was created for those with a low credit score. Often, those who had poor credit had a hard time obtaining any type of loan for their cars. Dealers and banks considered the chance of a default as too high.

With the help of the black box which is available, you are now able to take out a loan for a car even the credit score of your extremely low. The black box renders your vehicle ineffective unless you maintain the monthly payments. Therefore, there’s a significant incentive to pay. This is what makes lenders more likely to approve an application.

One of the firms who pioneered the technology that developed it, compliance rates have increased by an astounding 500%!

PAYGC finance is typically used as a supplement to a standard Hire Purchase vehicle loan. It means the financing provider is the owner of the vehicle until you’ve made the final payment. When you have reached that point, the car is yours for the last time with the Black Box taken away.
What do you think of the complaints made on behalf of Pay As You Go Car?

Since the black box first began appearing in cars across the UK It was criticized and mocked.

Since the device is fitted with the GPS device, the privacy concerns were the first issue to be considered. However, these are not relevant to the financial aspects of the device. The lenders have no interest at all in the vehicle you’re driving. This is only of importance the insurance company (if any).

It’s even more alarming that you could end up stranded somewhere in the wilderness when your vehicle shuts down because of a late payment.

What is the likelihood of this happening?

Not particularly. The finance companies have been aware of the issue, but of course. They are not gaining anything from the vehicle being parked in a dangerous neighborhood or outside and being damaged or stolen.

Therefore each black box will certainly inform you in advance that a new installment is coming due. This will eliminate the possibility of you not remembering to make the payment. Also, there’s always an opportunity to extend the grace period. This will allow you to return the vehicle to the garage and ensure that it is secured.

Sometimes the grace period could be just for a couple of days. Sometimes, it could be up to a whole month. In any case, you’ll be able rectify the issue. Once you pay the amount then you will be able to continue to drive the vehicle.

But, isn’t it an awful bit rough?

You can, of course you could argue that it’s not fair to stop the possibility of driving this way. But , the finance industry will have a plan in the event that you don’t pay the loan obligation. Pay As You Go Car seems a far less threatening than sending a collection agency to come and visit.

Indeed, some have suggested that the black-box device could be a beneficial method to manage your financial situation. The online platform for finance writes Disease Called Debt:

“When the budget is tight it’s logical to first pay your bills of priority for example, mortgages or rent, as well as other utilities (after all, you’ll be able to cut your electricity off fairly quickly if you not pay). The technology behind the payment boxes could help move cars finance charges to the top of the list of bills that need to be settled first. this is a great idea (…) so long as the decision doesn’t need been made to choose between for car electric or finance for instance.”

This logic is a good one. If you are really in need of the car, then you should be able to afford the required payments to afford it. The black box for car finance serves as a reminder.

However having a black box in your vehicle could provide many obvious advantages. It already stated that it permits you to obtain car financing even if you have poor credit. In addition there are the following benefits:

It’s one of the most straightforward finance options that are at your choice. Pay and then enter the code to continue driving. If you aren’t able to pay the amount, must wait until you are able to.

Contract negotiations are much easier , too. Black box car finance doesn’t require complicated credit checks since it actively encourages and encourages the compliance. The likelihood of default is much lower.

In the end in the long run, car finance that is black box can result in more fair financing agreements. If compliance actually increases in the manner that is advertised the likelihood of defaulting is reduced down significantly. In turn interest rates will drop too and this makes this the perfect win for both parties.

In one of the most creative stages the world of car finance might have struck gold by using black box car finance. It will be fascinating to see if the new technology is truly a revolution, or if it remains an untapped niche.