Car Loans Are Now Americans' No. 1 Bill-Paying Priority

Car paymentsBy PALLAVI GOGOI, AP Business Writer

The recession and its hangover may have turned bill-paying habits upside down. Cash-strapped Americans are paying off their car loans before they pay credit card bills and make mortgage payments, a study finds.

It used to be that Americans would pay their home loans first, then their credit card and car loans. After all, homes have been most people's most valuable possession for decades, and nobody wanted to jeopardize that.

But TransUnion, a credit information company, studied the payment patterns of 4 million Americans with at least one car loan, one credit card and a mortgage and found a clear priority for staying current on the car loan.

Among Americans who were late on payments last year, 39% were delinquent on the mortgage while current on the car loan and credit cards, and 17% were late on credit cards while current on the other two.

Only 10% were late on the car loan while current on the other two. When TransUnion first did the study in 2006, staying current on the mortgage was the priority, says Ezra Becker, the company's vice president of research and consulting.

"Today, most people need a car to get to a job or to look for a job, and that has made cars a priority," he says.

It hasn't helped that home prices keep falling while the mortgage remains by far the biggest payment for most people. The latest Standard & Poor's/Case-Shiller home price index found that prices in big cities had fallen to 2002 levels, down 34% from the peak.

There is also more leeway on the mortgage. Foreclosure can take two to three years. Cars can be repossessed 90 days after people stop paying.

Matt Saxton of Columbia, Md., was not surprised by the study's results. Saxton is on unpaid medical leave from work, recovering from spine surgery and relying on his savings.

Saxton says he dares not be late on his car payment and risk having his car repossessed. Instead, he's decided to be late on his credit cards and student loans.

"I can work with the credit card companies. They won't shut off or take away anything," says Saxton, who made a $474 payment this week. "I won't have the ability to get to work or even get another car if they repossess this one."


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Kevin Gorinshteyn

There's an interesting article on about the dangers of being a repoman. There have been several instances in the news recently in which repossession men and women, and the repo companies that they’re affiliated with have helped to identify and bring criminal agents to justice. As much of the law in the United States is affiliated with property and it’s protection, repossession work often deals closely with legal codes and restrictions. Even though experienced repo men do their best to avoid confrontation when out on jobs, many repossession situations can still become heated and laws can get aggressed and broken.

April 19 2013 at 5:29 PM Report abuse rate up rate down Reply

Maybe if people did not have car loans, they would have money to pay their mortgage. I was raised, if you need a car and have $1,000. Then you bought a $950 car and a $50 repair book. Why anybody would borrow money to loose money (car depreciates) and then have to pay more for insurance becuase they borrowed the money is unbelievable. Money should be used as a tool to make your life easier, not harder

April 05 2012 at 12:33 AM Report abuse rate up rate down Reply
Herman Blackman

When all else fails you can live in your car . And it will be hard to repo when you are in it. Another plus to buying a roomy SUV.

March 30 2012 at 1:34 PM Report abuse rate up rate down Reply
Hi Sweetie

I've experienced a lot of credit issues in the past and spent years cleaning up my act to the point of almost an obcession in paying my bills on first , car , etc......For fun , because I was so proud of myself of always paying my bills timely , I checked my credit score......27 accounts in good standing.....every box in the green for years....."609 !"........My score was a "D" because I had too much credit (I only used maybe 7 or 8 of the accounts by the way).......Well , I decided to never kill myself again after being treated like that and pay the bills of my choosing when I have the money. I have totally trashed my credit and will never charge or buy something on terms ever again. I'm done trying to be the perfect example....where did it get me ? Nowhere.

March 30 2012 at 9:23 AM Report abuse rate up rate down Reply

don't let the mediyuuh continue to get away WITH THEIR LIES 24/7.

please pass it all around.

March 30 2012 at 1:45 AM Report abuse -1 rate up rate down Reply

That "cash for clunkers" government deal is part of the problem. People who had cars that were older but paid off then took out loans on cars that they now can't afford. Nothing like the government offering a small incentive that turns into a big debt while the economy is still in the toilet.

March 30 2012 at 12:31 AM Report abuse rate up rate down Reply

I pay for my house....I have no car payments since I buy old prices are as expensive as a car payment to me so I'd rather eat than pay 450 for a car.

March 29 2012 at 8:30 PM Report abuse rate up rate down Reply
2 replies to davefromfwb1's comment

that a good plan.

March 30 2012 at 1:57 PM Report abuse rate up rate down Reply

the good old days, when [people used common sense

April 05 2012 at 12:35 AM Report abuse rate up rate down Reply

I am on a 7 year plan now to pay my debt off and then retire. I just refinanced my house for 10 years with a credit union at 3.67 percent and 300 total closing costs, I did not believe it at first. I am getting ready to pay off my truck and I have maybe 1000 bucks in other debt. I plan on paying extra on my mortgage when I can as I have the past 6 months and just hope I don't do all this and then drop dead,lol.

March 29 2012 at 7:51 PM Report abuse +2 rate up rate down Reply

Thanks to an improving economy, 24 straight months of job growth and the resurgence of GM Americans can now afford that car payment.

March 29 2012 at 7:42 PM Report abuse -2 rate up rate down Reply
1 reply to Kevin's comment
Ron Stokes

That would be a slightly improving economy, until 2013 when the tax cuts go away and our GDP is on the negative.

March 29 2012 at 8:30 PM Report abuse -1 rate up rate down Reply

I've found that Condo owners usually stop paying their common fees before anything else when things get rough. It takes about one year to forclose.

March 29 2012 at 6:28 PM Report abuse rate up rate down Reply