What happens to your car payments if you die?

Bills pile up even if you're six feet under

Editor's Note: While written a little while back, we believe the information contained in this article remains correct. For confirmation, we reached out to the American Financial Services Association, a trade association that represents auto finance companies in Washington DC and in state capitals. Jack Ferry, as spokesman for the association, wrote via e-mail: "The estate of the deceased is responsible for loan payments or a lump sum payoff, unless the deceased purchased credit life insurance. If the deceased had purchased credit life insurance on the loan, then the loan is paid off by the insurance carrier."

Few people like to think about that great parking lot in the sky, but every one of us is going to run out of gas sooner or (hopefully) later. Our descendants, heirs or next-of-kin will hopefully arrange for a proper sendoff, but what about the ride sitting in the driveway that we still owe a bundle on? Are descendants obligated to make car payments on leases and loans for cars they don't own and haven't signed any contracts for? We asked key auto industry people to state official policies.

"In the event an automotive loan customer/co-buyer/co-lessee passes away," says Tony Sapienza, a communications manager for a domestic auto lender, "The first step is that (the lender) will ask that the family or Power of Attorney provide us with a copy of the Power of Attorney and death certificate. We also advise family or POA for the customer to continue making payments on the vehicle as they communicate with us how they'd like to proceed."

What about heirs?

Sapienza says heirs aren't officially on the hook to foot the balance of the loan. "There are several options," said Sapienza. "[This includes the] payoff of the vehicle, the family assuming payments if they so desire or the family voluntarily surrendering the vehicle if they determine they do not need or can't afford it." Of course, finance companies being finance companies, none of the proffered options include a hug and a softly spoken, "Money isn't everything. Take a month to think about it and call us when you're ready – we know this is a difficult time for you."

Justin Leach, a spokesperson for Toyota Financial Services, explains how an estate can ultimately be responsible. "If the family wants to keep the vehicle, they can continue, of course, to make the car payments," Leach said. "If they don't want it, they can return it, we'll sell the vehicle at auction and apply the proceeds against what's owed. If they owed $12,000 and we sell it for $10,000, for example, one of our probate attorneys will bill the estate for the balance."

Is there any insurance I can buy to protect my estate?

Leach recommends planning ahead. "At the time of purchase, some customers will get Credit Life Disability Insurance, which takes care of outstanding balances," he said. "They pay it off in the event of a death and you get to keep the car. It obviously depends on what the family wants to do, but it isn't too complicated, really; keep it or return it. Hopefully they've bought good insurance and it takes care of it for them."

Leach also notes current policies have changed with the times. "Some time ago you could just bring a car back," he said. "And some companies would just eat the difference and not go after the difference in court. It's not like that anymore."

Insurance payments have to be thought of as well. "If an insured dies, coverage will be provided until the end of the policy period for anyone covered under the policy at the time of the insureds," said Krissy Posey, an Allstate spokesperson. "A spouse has a duty to notify us whenever someone on the policy needs to be removed, and if a friend is acting as the insured's legal representative, he/she may be covered under the policy until the end of the premium period."

Final (ahem) word? Plan ahead, as we'll all be dead – eventually.

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