Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Market Archive


Auto loans retain priority bill-pay status: TransUnion

 Permanent link
CHICAGO (3/24/14)--Consumers are making mortgage payments before squaring away credit card balances for the first time since 2008, a TransUnion study released last week found.

But car payments remain miles ahead.

As of September 2013, the number of 30-day delinquencies for auto loan payments sat at 0.89%, almost a full percentage-point lower than both mortgage and credit card payments, which sat at 1.79% and 1.86% respectively ( TransUnion March 19).

The 30-day delinquency rate in September 2012 for mortgages was 2.42%, while it was just 1.81% for credit cards.

"One of the biggest impacts of the Great Recession to the credit system was its influence on consumer-payment patterns," said Ezra Becker, co-author of the study and TransUnion vice president of research and consulting ( MarketWatch March 21). "As unemployment rose and home prices cratered, increasingly more consumers were faced with financial constraints and had to make difficult choices--and many chose to value their credit-card relationships above their mortgages."

That trend appears to be shifting.

But while auto loans have been the most popular for consumers to pay back for more than a decade--a fact some believe is largely driven by the perceived inconvenience of public transit--financial planners say consumers should start ranking their cars below their mortgages as well.

Defaulting on a car loan might mean having to take the bus or the train to work. Defaulting on a mortgage, meanwhile, might put someone out on the street.

"You should pay your home, food and utilities before transportation," Kimberly Foss, founder/president of the Roseville, Calif.-based financial-planning firm Empyrion Wealth Management, told MarketWatch , adding, "If you get kicked out of your house, you have no roof over your head, nowhere to live."