How Does Black Box Car Finance Work?

The world of car finance is in the most revolutionary phase to date. In the past 10 years it has revolutionized the way we purchase cars and the amount we can afford. In the long line of new and innovative products that have been introduced, pay As You Go car finance is just the most recent. Can it live up to the initial praise that was attributed to it?

The lessons learned from insurance

Pay as you go might be a new phrase. However, it’s not really being considered a new innovation. Insurance firms have used it for some time and have seen great results. However, recently it has also become well-known as a car financing instrument.

Payment As You Go Car relies on a tiny black box which is fitted to the car’s front. 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 that they followed the guidelines stipulated in their contracts. Inexperienced, young drivers such as those who aren’t experienced enough, could not have been permitted to drive in the dark and the black box could verify their compliance.

With a slight twist, the same device can be made 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 monitoring your driving habits It simply regulates your monthly payment plan. When you reach the end of the month, you pay the interest rate. You’ll get an electronic code. In the box in black, you will be granted the right to drive the vehicle for another month.

If you don’t manage to make the payment and you don’t pay, you will not receive an additional activation code. In the end, your black car will notify you, and then deactivate your vehicle. You won’t then be allowed to drive until you make the payment and receive a new one.

Who’s it intended for?

The Pay As You Go Car finance was created for those who had a poor credit score. Most of the time, those with poor credit had a hard time obtaining any type of loan for their cars. Dealers and banks considered the possibility of default to be too great.

Thanks to the black-box that is now in use, you can obtain a car loan the credit score of your extremely low. The black box renders your vehicle ineffective unless you pay the loan on time. Therefore, there’s a significant incentive to pay. This is what makes lenders more willing to consider an application.

One of the firms who pioneered the technology the compliance rates have increased by 500%!!

PAYGC finance is typically used when used in conjunction with the regular Hire Purchase auto loan. It means the financing provider retains ownership of the vehicle until you’ve made the final payment. At this point, the car is yours for the last time with the Black Box taken away.
What are the arguments over Pay As You Go Car?

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

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

The more troubling aspect is that you may be stuck somewhere in the wilderness when your car stops working because of a late payment.

What is the likelihood of this happening?

Not particularly. The finance companies have been aware of the issue, naturally. They have nothing to gain from the vehicle being parked in a dangerous area or out outside in which it could be taken away or even broken into.

Therefore every black box will certainly inform you ahead of time that a new installment is coming due. This will eliminate the possibility of not making the payment. There is also an opportunity to extend the grace period. This will allow you to return the vehicle to the garage and ensure it’s secured.

Sometimes the grace period could be just for a few days. In other cases, it could last more than a 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?

It’s possible to think it’s not fair to stop your vehicle from this route. But , the finance industry will be able to take action 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 around to meet.

Some have even suggested that the black-box device is a good way to manage your financial affairs. The online platform for finance writes Disease Called Debt:

“When you’re in a financial pinch it’s logical to first pay your bills of priority for example, mortgages or rent or other utilities (after all, you could be able to cut your electricity off very quickly if you not pay). The technology behind the payment boxes can effectively push cars finance charges higher on the priority list of bills that need to be settled first. this is a great idea (…) in the sense that there isn’t a need to be made in between the car electric or finance for instance.”

This logic is very logical. If you are really in need of the car, then you should be able to afford the necessary payments to get it. Car finance in black boxes serves as a reminder.

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

It’s among the most simple finance options available to your available. Pay and then enter the code to continue driving. If you aren’t able to make the payment, must wait until you are able to.

Negotiating contracts is a lot simpler as well. Black box car financing doesn’t require complicated credit checks since the system actively encourages and encourages conformity. The likelihood of default is significantly lower.

In the long term in the long run, car finance that is black box could lead to more fair finance agreements. If compliance actually increases to the extent that it is claimed the chance of defaulting goes down significantly. As a result interest rates will drop too which makes this technology an win-win for both parties.

In one of its most ingenuous stages the world of car finance could have found gold by using black box car finance. It will be fascinating to see if this technology will lead to a new revolution or if it is as a niche.