Well, You Can Live In Your Car
From Business Insider, an AP story, Americans now put paying their car loans first -- a shift:
It used to be that Americans would pay their home loans first, then their credit card and car loans. After all, homes have been the most valuable possession for most people for decades, and nobody wanted to jeopardize that.Among Americans who were late on payments last year, 39 percent were delinquent on the mortgage while current on the car loan and credit cards, and 17 percent were late on credit cards while current on the other two.
Only 10 percent 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.
This makes sense if you're underwater in your house, which was much less common until recently. This is particularly the case given how long a foreclosure takes versus a repossession (or shutting off your credit cards).
Peter H at March 30, 2012 8:04 AM
Considering how many new delays there are on forclosing on a home,and new programs designed to help those who bought too much house, but no new delays on reposessing a car, it makes perfect senese.
Joe J at March 30, 2012 8:30 AM
Makes sense. Your home loan is probably in the thousands per month, but your car loan is probably in the hundreds. So it's an easier payment to make.
I'm against car loans myself, and have only ever bought used cars, so I wouldn't have a car loan to default on to begin with. So by definition the only loan I have is a mortgage, so it's the only thing I CAN default on.
I can't be the only person who pays cash for cars.
NicoleK at March 30, 2012 8:45 AM
More people should be living in cars, considering that cars now cost as much as houses did when I was growing up.
damaged justice at March 30, 2012 8:50 AM
If I quit making my house payments, won't Barry pick them up for me?
Steve Daniels at March 30, 2012 9:02 AM
@NicoleK- my husband and I have purchased three cars during our marriage, all with cash. So no, you are not alone. We have a perpetual car savings account we contribute to. Amounts vary month by month, but then we can earn some interest on our money and pay cash for the next car.
As for paying off the car and not the house...
You can't drive your house to work. People usually have friends/relatives who can help house them. It's more difficult to find someone to share their car. Especially if you live in a rural area with no public transit, and where driving is often very necessary.
UW Girl at March 30, 2012 9:08 AM
If it's a choice between making a mortgage payment and making a car loan payment, you're already in deep doo doo. In many places you need a car to get to work or to look for work and it can be repossessed after missing one payment. It can take months or years to forclose on a house and many banks don't want to right now because they already have so many houses in inventory that aren't worth what is owed on them and they can't sell. The loss for the bank on an underwater house would likely be much higher than the loss on an upsidedown car loan.
nonegiven at March 30, 2012 10:24 AM
I don't think it's a logical examination of what people can live in, payment amounts, or the length of the foreclosure process versus repossession.
I think it's a fundamental shift in how people are viewing their houses and cars.
When you had a substantial investment in your house and had saved for it for a long time, you made the payment no matter what because you didn't want to lose the 10-15% downpayment you'd made. You took foreclosure personally. It hurt.
With the advent of no-money-down lending, people didn't have to make as much of an initial financial investment in their house. They didn't have the emotional impact of having saved for the downpayment.
Without the emotional impact, foreclosure becomes little more than breaking a lease. It only takes away money you might have had with the rise in property values, not actual money you scrimped and saved to accumulate.
The house becomes simply another thing you're owed and its repossession is "unfair." The house is no longer something you earned.
The car, on the other hand, required saving some money to put down on it. You "earned" that Miata.
Conan the Grammarian at March 30, 2012 10:28 AM
Now, if they were repossessing your pirate....
Conan the Grammarian at March 30, 2012 10:29 AM
foreclose
nonegiven at March 30, 2012 10:32 AM
I can actually see why people might pay their car loan before their house loan when forced to choose between the two. Cars are repossessed much more quickly than a house is foreclosed upon, and people probably rationalize that they will fix it "next month", or if they do lose their home they can still go rent.
I can't really see why a credit card payment would have priority over the mortgage though. Unless that's their only reliable "cash" source and they need to keep it open to pay the rest of the bills. Although if that's the case, they are in a shit storm of hurt and should probably have started cancelling their cable, etc. long ago.
Personally, if forced to choose, my mortgage would always come first. I don't have a car loan, and I would hate to lose a home I worked so hard for. Plus, my dead grandparents and father would surely come back to haunt me for making such poor decisions.
Meloni at March 30, 2012 11:21 AM
I drive to work with my car. No car no work.
I cannot drive to work in a house....now a pirate...that might be different.
The Former Banker at March 30, 2012 12:42 PM
Amy, you are mentioned today by name in the But you’d be forgiven for thinking the Rauch adaptation of hell is the real thing. His humorous rewrite has taken on a life of its own, ending up in casual conversation, all over the web and even the occasional newspaper article.
Two years ago, for example, syndicated advice columnist Amy Alkon used the fake quote when replying to a reader’s question about whether a “party girl” and introvert guy can make for a successful couple.
“Sartre once said, ‘Hell is other people at breakfast,’” Alkon wrote. “An introvert sees no reason to narrow it down to a particular time of day.”
And some see no reason to track down the original of a seemingly famous quote. . .
You can now add the New York Times to the list of Sartretorial offenders.Toronto Star for mangling the fake quote of JP Sartre, hell is NOT other people at breakfast, can you correct this one day and blog even about HOW you made this blunger? SMILE.
Danny BLoom at March 30, 2012 6:58 PM
Amy, you are mentioned today by name in the Toronto Star for mangling the fake quote of JP Sartre, hell is NOT other people at breakfast, can you correct this one day and blog even about HOW you made this blunger? SMILE.
http://www.thestar.com/news/insight/article/1154355--newsmangled-in-the-internet-age-satre-misquote-won-t-go-away
Danny BLoom at March 30, 2012 6:59 PM
"If I quit making my house payments, won't Barry pick them up for me?"
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Nope. All of the programs to help out struggling homeowners require that you're current on your mortgage and making payments.
Mike Hunter at March 31, 2012 10:20 AM
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