What Consumers Pay First: Credit Cards, Mortgages Or Auto Loans?

When times are tough and consumers are trying to determine which payments to make first, its no surprise that auto loans take precedence over both mortgages and credit cards. Because of urban sprawl and the lack of access to an adequate transit system, a car is a key component in helping folks earn a living. Basically, without having access to a vehicle, people aren't able to commute to work.

A September 2013 TransUnion study has found that 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. So, this trend of paying car payments first was well before the current recession.

30-Day Delinquency Rates for Consumers Possessing Auto Loans, Credit Cards and Mortgage Loans - TransUnion Study (Delinquency rates only reflect consumers with all three credit products)
Year		Mortgage		Credit Card		Auto Loan
SEP 04		1.26%		2.25%		0.95%
SEP 05		1.24%		2.24%		0.89%
SEP 06		1.32%		2.41%		0.97%
SEP 07		1.71%		2.51%		1.01%
SEP 08		3.32%		3.29%		1.65%
SEP 09		4.92%		3.99%		1.62%
SEP 10		3.67%		2.62%		1.33%
SEP 11		2.94%		2.24%		1.04%
SEP 12		2.42%		1.81%		1.04%
SEP 13		1.79%		1.86%		0.89%
DEC 13		1.71%		1.83%		0.87%

"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 vice president of research and consulting for TransUnion. "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. This was a measurable result of the economic environment, wherein many consumers were underwater on their mortgages and at the same time needed the liquidity afforded by credit cards to make ends meet." 

About the Study The study was completed using a series of monthly cohorts of anonymous consumer information from December 2002 through December 2012. Each cohort was composed of consumers who had at least one mortgage, auto loan and credit card open and in good standing as of the cohort definition month. The credit performance of each consumer was evaluated 12 months later using a 30 days past due or worse definition of delinquency -- thus the performance data span December 2003 through December 2013. Each monthly sample included approximately 2.5 million consumers.