Consumers pay auto loans first, credit cards and mortgages later

Consumers pay auto loans first, credit cards and mortgages later

5 Apr , 2012  

Auto loan payments come first

Consumers showed an interesting trend in 2011: paying auto loans before credit cards and mortgages, TransUnion said in a recent report.

TransUnion took a look at consumers that had at least one open auto loan, one open credit card account and one open mortgage and found a clear preference for auto loans – ahead of both credit cards and mortgages.

Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit, shed some light on this payment trend.

“[The] auto loan is seldom the first choice when a consumer has to decide which payment to miss,” Becker said. “A few reasons why auto loans have become the preferred payment to make include the need for an auto to get to work or look for employment, and the fact that an auto loan is not a revolving loan — the impact of repossession is greater than the loss of a credit card.”

Of consumers who were delinquent on payments:

  • 39.1% were delinquent on a mortgage but current on auto loans and credit cards
  • 17.3% were delinquent on a credit card but current on auto loans and mortgages
  • 9.5% were delinquent on an auto loan but current on credit cards and mortgages

Becker also said that equity factors could be playing a role in consumers’ payment decisions.

“[Consumers] may have equity in their autos after several years of payments that they are looking to preserve — which is no longer the case for most homes,” Becker said. “In fact, negative equity has become increasingly common for homes, which may further contribute to the shift in payment preference to auto loans.”


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