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Paying car loans comes first with many consumers

8:56 PM, Apr 2, 2012   |    comments
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What's more important: your car or your house?

Many consumers say they'd rather be able to hit the road. According to a study released by credit and information management company TransUnion, consumers were more likely to pay their auto loans before their credit cards and mortgages last year.

An analysis of about 4 million consumers who had at least one open auto loan, bank card and mortgage in 2011 found that about 39% of consumers were delinquent on their mortgage while current on their auto loan and credit card payments.

In contrast, 9.5% of consumers were delinquent on an auto loan while current on their credit cards and mortgage.

"Consumers need their cars to either get to work or seek employment," says Ezra Becker, vice president of research and consulting at TransUnion, citing the "still stubbornly high" unemployment rate of 8.3%.

Becker also says that with a "really, really strong" used car market, consumers are more willing to protect the value of their car by staying current on payments. Whereas with the housing market still recovering and many homes worth less than what consumers owe on them, there's less motivation to make mortgage payments on a "negative asset."

Credit card payments came in as second-most important to auto loans last year, with 17.3% of consumers delinquent on a credit card while current on their auto loan and mortgage, the TransUnion data show.

In a traditional, or pre-recession, payment hierarchy, consumers put their mortgages first, auto loans second and credit cards third. In 2008, they began paying off credit cards before mortgages and have continued to do so since then, according to TransUnion's study, which it began in 2010, looking at data from late 2006 and after.

Last year was the first time TransUnion included auto loans in its analysis, so it's unclear whether the shift in prioritizing auto loans first happened in years prior to 2011.

Felicia Young of Tampa says paying her auto loan became more important in the last two years.

"When my credit scores declined and I was facing removal from my house, my car suddenly became the only item I had worth anything," says the 45-year-old, who holds both full- and part-time jobs as an administrative officer.

Young adds that she needs her car "to get to work and make money. Period."

"If push comes to shove, you can live in your car," Becker says. "But you can't drive your house to work."

By Hadley Malcolm, USA TODAY

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