Consumers Prioritize Car Payments Ahead of Mortgages and Credit Cards, Study Says | Edmunds

Consumers Prioritize Car Payments Ahead of Mortgages and Credit Cards, Study Says


Just the Facts:
  • Consumers place a higher priority on making their car payments than credit card and even mortgage payments, according to a new TransUnion study.
  • Although the importance placed on making mortgage and credit-card payments fluctuates with the economy, auto loans consistently remain the highest priority.
  • From 2003 through 2013, the average delinquency rate for auto loans was 1.11 percent, compared to 2.39 percent for mortgages and 2.46 percent for credit cards.

CHICAGO — Consumers place a higher priority on making their car payments than credit card and even mortgage payments, according to the new TransUnion Payment Hierarchy Study.

Moreover, according to the just-released study, this has been the case for quite some time. The report notes: "Consumers have placed an emphasis on paying their auto loans before their mortgages and credit card payments — by a wide margin — since at least 2003."

Interestingly, although the importance consumers placed on paying credit card and mortgage debt has gone back and forth with the general state of the economy, auto-loan payments remained the highest priority from 2003 through 2013, the entire period covered by the report.

For the study, TransUnion took a sample of 2.5 million (anonymous) consumers, compiled monthly payment histories for those who had at least one mortgage, one auto loan and one open credit card, then looked at the delinquency rate for each.

Over the study period, the average delinquency rate for auto loans in September of each year was 1.11 percent, compared to 2.39 percent for mortgages and 2.46 percent for credit cards. The highest auto-loan delinquency rate was 1.65 percent, while for mortgages it soared to 4.92 percent and for credit cards 3.99 percent.

Not surprisingly, it was during the economic downturn that began in 2008 when delinquency rates hit their high points. 

Said Ezra Becker, co-author of the study and vice president of research and consulting for TransUnion, in a statement: "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."

Although mortgages, formerly the top priority, took a backseat to credit cards during the recession, car ownership stayed at the top of the consumer priority list. Clearly, getting to work — or perhaps getting to job interviews — during that period was a major factor in the decision-making process.

And now that the economy seems to be in mid-recovery, it appears that we still place the highest value on personal mobility.

Edmunds says: This study leaves no doubt that we consider personal transportation a crucial part of our daily lives.

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