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This is the bill most Americans pay first

Hint: It's not the mortgage, credit cards, or cable.

By Money Staff Dec 18, 2013 6:57PM

This post comes from Catey Hill at partner site MarketWatch.


MarketWatch on MSN MoneyIf you want to know Americans' priorities, just look at who's got the keys to their hearts: their cars. Unfortunately, that affection can put them on the road to financial ruin.


Couple driving in convertable © Image Source, SuperStockAmericans tend to pay their car loans before their mortgages or credit cards each month, says Steve Chaouki, group vice president in credit bureau TransUnion's financial services business unit.


Consider: Among consumers with auto loans, mortgages and credit cards, the 30-day delinquency rate for auto loans was just 0.88 percent last year, while the rate for credit cards was 1.82 percent and the rate for mortgages was 1.91 percent. While overall, those rates have improved since 2009, when the 30-day delinquency rate for auto loans was 1.34 percent, credit cards 2.82 percent and mortgages 3.83 percent -- the priorities are still clear: cars, then credit cards, then mortgages. And, says, Chaouki, autos are likely to again lead the pack for 2013.


So what's behind the priority we give to our rides?


"Some of this is about freedom," says Kimberly Foss, the founder and president of Roseville, Calif.-based financial planning firm Empyrion Wealth Management. "They feel stuck if they don't have a car, so they pay it first."


Joel Ohman, a certified financial planner and founder of, says that this may also have to do with media headlines. "People hear about others who have been late on their mortgage and still kept the house, so they think they can do it too."


Or, it may simply be that Americans love their automobiles.


There are more passenger vehicles in this country than licensed drivers, and one in four people considers his or her car "something special" vs. merely a "means of transportation," the Pew Research Center found.


What's more, many Americans ascribe human characteristics to their cars: 31 percent say they think of their car as having a personality — with those ages 18 to 29 dominating that group (41 percent of them think their ride has a personality).


What's more, the love affair is likely to progress: Transunion predicts that auto loan debt per borrower will jump more than $1,000 from a projected $16,942 in the fourth quarter of 2013 to $17,966 in same period in 2014.


On its surface, this devotion to car payments may not seem to be a problem, but financial experts say that consumers have their priorities wrong. "It's a huge mistake to pay off the car first," says Ted Jenkin, a certified financial planner and founder of Atlanta-based financial services firm oXYGen.


Consumers should instead first set aside money for necessities, says Kimberly Foss, the founder and president of Roseville, Calif.-based financial planning firm Empyrion Wealth Management.


"Pay for food and essential medical care, housing and related utilities, and transportation -- in that order," she says. "It about survival."


Once you’ve paid for those items — which should account for about 50 percent of your monthly spending — prioritize things like alimony, child support and taxes, which you can go to jail for not paying, as well as other debts like credit cards, Foss says.


Some experts point out that, if you can't pay all your bills, prioritizing credit cards over both auto loans and mortgages is a mistake as well. The reason is that auto loans and mortgages are secured debts -- meaning that the lender can take back the asset that's backing the loan (in these cases, your car or your home) if you don't pay.


Of course, that's not to say you should skip the credit card payment either. Experts say you should pay at least the minimum, or more if you can, on all debts each month to avoid dinging your credit score.


But if you find yourself in a situation where some bills might have to fall through the cracks, call the creditors and see what you can work out, says Jenkin.


"They are for-profit companies and they don't want to get nothing," he says. "It's better to call in advance and see if you can work something out -- just be sure to get it in writing."


More from MarketWatch:

Dec 18, 2013 10:09PM
Probably the auto is paid first because without it the majority of workers can not get to work to make a wage to pay any bills.
Dec 18, 2013 10:20PM
I get a kick out of seeing expensive cars parked outside shacks and trailers.  When a person thinks their car or clothes define them, they are correct!  Because a person who thinks that way shows the world what a fool they are.
Dec 19, 2013 10:12AM

OK, Am I the only one who realizes that if I don't pay my car loan and my car gets re-po'd that I would end up losing everything else in short order because I NEED MY CAR TO GET TO WORK TO MAKE MONEY TO PAY MY OTHER BILLS?



Dec 19, 2013 12:18AM
Gee, and I thought it would be Mobile & Smart phones as it appears many people are glued to them 24/7 with service plans equaling auto payments.
Dec 18, 2013 9:18PM
Probably because they may have to live in them.
Dec 19, 2013 9:47AM
well gee wiz, you gotta have a car to get to work to make money to pay the bills.  Why is that such a surprise?
Dec 19, 2013 3:37AM

I don't owe anyone a dime.  The problem with our society is that most folks owe way too much.

And when I did have a mortgage, that was always the bill that was paid first.  The second were my savings accounts for our daughters' education and our retirement.

Dec 19, 2013 10:26AM
You need your car to get to work. If you can't get to work, you can't pay any other bills. The "road to financial ruin" is probably littered with people who lost their cars. It's not about being "stuck". Many people don't have access to public transportation.
Dec 19, 2013 6:25AM
 I guess the writers forgot this one. Actually the first bill that we are required to pay are TAXES. They are tore form you income every weak and more will be coming. Thank you congress for passing a budget with a 2 trillion dollar deficit increase. It does not sound like a budget to me .
Dec 19, 2013 9:10AM
My car is paid for but even if it wasn't my mortgage on a very modest home comes first.  A roof over my head is more important than any car.
Dec 19, 2013 1:20AM
BALLS O FIRE you right !  As a social worker that's the reason I hear most often:  might have to live in it, plus you still have the mobility to get around if you're homless, plus a lot of jobs require cars.  AND, of course, cars are status symbols... at least for older folks and teen-agers.
Dec 18, 2013 10:08PM

they didn't ask payment first, always has been. car loan is auto-deduct.....

Dec 18, 2013 11:43PM
For me it was the mortgage first, the electric second and then the car.
Dec 19, 2013 4:21AM
The first bill I pay every month... house... the cars paid for... the truck is paid for....
Dec 19, 2013 10:51AM
    The financial planner got the formula backwards. If one can not get back and forth to work how can one pay for food and shelter.
Dec 19, 2013 8:48AM
One thing that causes people to ding themselves down the road is when they have an extra $50 or 100 in the bank, is it burns a hole in there pocket. This should be left alone, forget you got it until you need it. A trick to saving some money is to have the Bank take $25 monthly and out it in a savings account. After a month or 2 you don't notice it missing and than one day you'll look at your statement and be surprised. I have been doing this for years on top of normal savings deposits separate from my checking business. For many years now I haven't been paying anything first and just pay the bills as they come in. I don't feel as if I'm paying anything in a particular order. Know your Bill and when they come in and be ready to pay them. Don't borrow from peter to pay Paul on a Bill as that won't work. I made that mistake when I was a youth and never let it happen again.
Dec 19, 2013 1:00PM
WRONG!!!!! The bill all working folks pay first is the tax bill. They take that out before we even get our cut.
Dec 19, 2013 12:50PM
You should always pay yourself first.
Dec 18, 2013 10:24PM
Best way to get back on your feet missed three car payments.BYE
Dec 19, 2013 9:52AM
What's a car loan? I mean besides the number one way to make sure you're always in debt.  We pay our mortgage first.  Our retirement accounts second.  The rest of our bills third and if anything is left over we have spending money.  Last time we had a car loan was pre 9/11 when we saw the dismal economic future and decided to stop wasting money.
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