Smartphones have transformed how we communicate and connect with the world around us and it appears consumers think they’re more important than automobiles.
According to a report from Bloomberg, when consumers are facing financial difficulties they’re prioritizing their phone loan over their car loan. While phone loans are relatively new in the United States, as the mobile industry recently shifted away from subsidized phones, it appears they have become a solid investment as consumers are more concerned about keeping their smartphone than their vehicle.
Consumers treat phone loans as they do home loans
Interestingly, PeerIQ CEO Ram Ahluwalia says “Payment priority of cell phones is higher than personal and auto loans and similar to or slightly lower than that of mortgage.” This effectively means that consumers place the same emphasis on their smartphone loan as they do on their home loan.
It remains unclear why consumers would pay their phone loan before their vehicle loan but Ahluwalia suggested cars are no longer a “central asset” as consumers can now access transportation with smartphone apps such as Uber and Lyft. That seems like a stretch and there’s probably a variety of reasons why consumers are prioritizing phone payments. Among the possible reasons is the need to keep in contact with family and friends as well as the fact that phone payments cost around $30 a month while car payments cost hundreds of dollars.
Regardless of the reasons, phone loans are becoming attractive to investors as consumers are unlikely to default. As Angel Oak Capital Advisors portfolio manager Clayton Triick explained, “Surveys are showing that the cell phone payment is a high priority for the consumer, and from that perspective we think that fundamentally they are pretty sound [investment as an asset-backed security.]
