Kill switches have become less enticing to lenders amid the Federal Trade Commission’s recent investigation into auto lenders’ use of the device, but GPS units aren’t gaining in popularity as a result, several sources told Powersports Finance.
In auto finance, Westlake Financial Services, Credit Acceptance Corp. and DriveTime Automotive Group Inc. have all been tapped by the FTC for additional information on their use of kill switches, which are able to track and remotely disable a delinquent borrower’s car.
Kill switches, however, are not nearly as common in powersports as they are in auto, Glenice Wilder, EFG Companies’ vice president of powersports, told Powersports Finance. “The first and biggest reason is liability,” she said. “Lenders do not want the legal battle of a bike being unusable in an emergency situation, or of a bike turning off while in operation, causing an accident.”
Additionally, installing kill switches on motorcycles is time and cost prohibitive, Tony Tarell, director of sales for Al3rt GPS, told Powersports Finance. “Lenders would have to pay dealers labor fees for an average of one and a half hours of work per device install, and dealers would have to split wires in the motorcycles, which could void the manufacturer’s warranty.”
While many auto lenders require consumers with bad credit to have the kill switch in their vehicle, the switches are not typically required in powersports, particularly for a non-highway vehicle or a motorcycle that is not the person’s primary mode of transportation, said David Gemperle, partner at Nisen & Elliott.
GPS units, on the other hand, are more common, EFG’s Wilder said. “Many of the lenders we work with, will install GPS units on motorcycles to track them in the event of a repossession.”
Al3rt GPS has been selling a lot more GPS units to dealers, with the rise of theft, but getting lenders to buy in has been the company’s biggest problem, Tarell said. This is due to a variety of reasons, including the high cost. Motorcycle GPS units cost — on average — $100 more, versus car GPS units, he added.
Lease-to-own powersports startup CycleOne Financial stopped using GPS units on its motorcycles at the end of 2015 once the company started receiving complaints from consumers about their motorcycle batteries dying, caused by the GPS unit, said Logan Riley, the company’s president.
A few years ago, GPS units did pull a lot of power, Al3rt’s Tarell agreed, but now most powersports GPS units — like Al3rt GPS’s units — go into a “sleep mode” after 15 minutes of no motion, therefore not draining the battery.
Today, lenders use GPS units more commonly to help consumers locate and recover lost or stolen bikes — not just to mitigate repossession risk, MotoLease Managing Partner Emre Ucer told Powersports Finance in June. MotoLease LLC, for example, includes complimentary GPS units on its motorcycles in the Express Program. The Express Program offers lease amounts between $1,500 and $6,000.