Why Won’t My Car Start?

Posted by & filed under Accounting Information Systems, Accounting Principles, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting, Video Updates.

Before many subprime borrowers drive their car off the lot, their car is equipped with a starter interrupt device, which allows lenders to remotely disable the ignition. This article and video highlight the problematic issues related to “electronic repossession.”

Questions:
1. What percentage of car loans are estimated to be lending for subprime borrowers?
2. Who is the leading device maker and what is their claim about the reduction of late payments?
3. Why are legal experts arguing that these tactics violate state laws? Do you agree or disagree? Discuss.
4. If PassTime or another manufacturer was sued in 2014 and it was probable that the subprime lenders would win $25 million in court for safety violations, how should the device maker report this in its annual report and financial statements?

Sources:
Corkery, M. and J. Silver-Greenburg. (2014). Miss a Payment? Good Luck Moving That Car. The New York Times, Sep. 24 (Retrievable online at http://dealbook.nytimes.com/2014/09/24/miss-a-payment-good-luck-moving-that-car/?_php=true&_type=blogs&_r=0)

NBC News Video. (2014). Lenders Remotely Disable Car When Payments are Late. NBC, Oct. 5 (Retrievable online at http://www.nbcnews.com/watch/nightly-news/lenders-remotely-disable-car-when-payments-are-late-338102851592)