Technology serving the interests of the poor

How can you reduce the interest rates for car loans made to the highest risk borrowers?

Note lots have long been the auto industry's roughest segment. But without them, industry officials say, many working-class people would have to rely on public transportation to get to their jobs. About 35 percent of the nation's 54,000 used-car dealers operate buy-here/pay-here lots and contend with default rates as high as 40 percent.

Systems such as On Time permit dealers to "drill down" even deeper with severely credit-damaged customers and still have some assurance that their only collateral on the high-risk loans - the vehicles - can be retrieved if the buyers default.

"Nearly every Saturday, we talk with someone who has been to seven or eight different buy-here/pay-here lots and were turned down at all of them," Williamson said.

"More people in this country have bad credit than have good credit," added James Ziegler, a retail auto consultant in Duluth, Ga. "If somebody didn't take a chance on these people, they wouldn't be able to work."

Simon of On Time said the systems dramatically reduce late payments.

"We have taken a 70 percent delinquency rate in the buy-here/pay-here business and transformed it to a 96 percent on-time rate," he said. "Now some mainstream finance companies are even saying, 'I'll finance these cars.' "

And what exactly does it do?

They're attached to a black box on the dashboard and start flashing on the first day a car payment is late. On the fourth day, after two more days of warning lights, the car won't start.