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Houstonians lead nation in size of car notes

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  • Houstonians lead nation in size of car notes

    Sept. 16, 2004, 9:28PM

    Houstonians lead nation in size of car notes
    Copyright 2004 Houston Chronicle

    Not only are our cars big in Houston, so are our car payments.

    Houstonians shell out more in average monthly car payments than any other city in the nation, according to a recent study by Experian Consumer Direct.

    Drivers pay an average $441 a month in Houston, compared to the national average of $383 and a Texas average of $415.

    Though Experian didn't set out to find out why we pay so much, people in the industry pointed to the city's lower credit scores, higher-than-average delinquency rates and appetite for pricier cars.

    In Houston, credit scores for consumers with no late auto payments averaged 668 versus 585 for consumers with at least one late auto payment. Nationally, average scores for consumers with no late payments totaled 689, versus 596 for those with at least one late payment.

    One factor that helps determine credit scores is the number of late payments a consumer has made. Experian's study found that Houstonians had late payments noted on their credit reports an average of 1.8 times, compared to the national average of 0.8.

    "Late payments affect your credit score, and that determines what types of terms you can get," said Arlene Dang, manager of analytics for Experian. "The car payments are a combination of the terms of the loan and the financed amount."

    The average loan amount in Houston was $26,470, compared with the national average of $23,143.

    John Thomas, an industry analyst with the National Automobile Dealers Association, said one reason for the higher transaction costs could be our love of big cars.

    "In Texas, you're generally talking about trucks and SUVs," he said. "Luxury SUVs are also doing well. These are vehicles that do well in places like Texas."

    Dealers also think it's more of a lifestyle issue than credit issue.

    "I think because of the weather we have year-round, people are outdoors a lot, and these cars are more conducive to that lifestyle than a small car might be," said Jeff Haas, of Jeff Haas Mazda and former president of the Houston Automobile Dealers Association."Our scores may be lower, but our payments being big is really about people's choices."

    Mike Powell, sales manager at Advantage BMW, says the larger 5 and 6 Series models are popular. "It seems like everyone that comes in here wants a car that gives them style and space," Powell said.

    Another factor may be the lower cost of housing here than in other regions, said Kelly Rote, of Money Management International.

    "With lower cost of housing, we can afford to spend more money on our cars than other people who have high real estate values," Rote said. "But whatever the reason, people who are going to purchase a new car should make sure they know the costs for this commitment they're making for whatever the loan commitment is."

    She advises consumers to consider all financing options from dealers and private institutions and to review their credit reports for errors that could hurt scores.

    "The smell of a new car is almost enough to make you sign on the dotted line," she said. "But take a step back, see if this a need or a want. Maybe you can put more money down next year and get a lower monthly payment."

    Source: Houston Chronicle
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