Consumers are now more likely to pay their car loans on time even when they're late on their mortgage and credit cards, sending auto loan delinquency rates to historic lows, new studies show.
The reason: Motorists realize that they need transportation to get to work or look for a job in today's slow economy, even if they're in foreclosure or piling up credit card bills, experts say.
Florida's auto loan delinquency rate is slightly higher than the U.S. average, because the state was harder hit by the housing slump. But auto loan delinquencies are shrinking in Florida too, surveys show.
For the second quarter this year, credit bureau TransUnion found the portion of U.S. auto loans at least 60 days late in payments was just 0.33 percent, the lowest level since TransUnion began tracking the data in 1999.
Florida's auto loan delinquency rate slipped to 0.41 percent in the second quarter, a tad higher than the U.S. average but still lower than the state's 0.56 percent rate one year earlier, TransUnion said.
Brittany Thornton of Tamarac illustrates the trend. She always paid her car down first when she had an auto loan to pay off.
"Otherwise, there's no way to get around. There's no way to make money," said the 23-year-old, who worked in restaurants and now is pursuing a degree as a legal assistant.
Fort Lauderdale-based AutoNation, the country's largest vehicle retailer, also sees delinquencies down. The company has a lower delinquency rate than the averages TransUnion quotes, and those slimmer rates have declined significantly over the past year, said AutoNation spokesman Marc Cannon.
"We have people coming in all the time who are refinancing their homes, but they're still making their car loan payments on time," Cannon said. "They realize they need their car to get to work and will pay their car loan before the mortgage."
Strong prices for used cars also are prompting motorists to stay current. That's because drivers realize they have "more equity in their vehicle," said Peter Turek, automotive vice president in TransUnion's financial services business unit.
TransUnion first recognized the preference to pay car loans first in its payment hierarchy report released late March. The study looked at payment habits by about 4 million consumers in each quarter who had at least one auto loan, at least one mortgage and at least one credit card open.
The study found that of consumers at least 30 days late on any payment, just 9.5 percent were behind on their auto loan, while current on other payments. In contrast, 17.3 percent were late on a credit card and current on the others, and 39.1 percent were late on the mortgage and current on the other debts.
The preference to pay auto loans first was greater in states like Florida, which suffered sharp drops in home prices.
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