We appreciate it’s probably not at the front of your mind, however, do you know what happens to a car on finance when you die? If you currently have an active car finance agreement with a lender and you pass away, does the debt get squashed? In short, no. Car finance deals don’t disappear when you die. Instead, the loan could be passed to someone else. Read the guide below on what happens to a financed car when you die and the options available.
Does car finance get cancelled when you die?
It can be morbid to think about and it’s not the first thing you’ll consider when taking out a car loan, but what happens to your car finance when you pass away? Well, many people will assume that because someone has died, their car finance automatically becomes void or the debt disappears. However, this isn’t always the case. Car finance is a type of loan and the lender will still need to be back. Depending on the type of agreement you have in place, the options will vary. Find out more below.
Who is responsible?
Repossession by the lender.
If your car finance is a secured loan such as Hire Purchase or Personal Contract Purchase (PCP) the entitlement to the vehicle usually lies with the lender throughout the agreement. In many cases where the lender owns the car, the car will be repossessed by the lender. The lender will then sell the car at auction and use the amount to pay off the finance. If the amount they get for the vehicle covers the cost of the loan, the loan is settled. If not, it comes off the debt and the individual’s estate will need to pay off the rest of the finance.
Paid by a cosigner or joint applicant.
If you’ve taken out a car finance deal with someone else, for example using a guarantor or a joint car finance deal, they will become responsible for your finance payments if you were to pass away. A guarantor agrees to pay your car finance if you fail to do so and it still stands if you were to pass away too. The guarantor will be expected to meet the monthly payments of a financed car when you die.
Similarly, a joint car finance deal means two people get finance on the same car. If one of those people were to pass away, the other will be responsible for meeting the repayments until the end of the deal or paying off the debt.
Using life insurance.
Some life insurance deals can be used to repay your car finance if you die. It can be possible to get funds from your life insurance policy to pay for your car finance when you pass away. Before this can be done, you’ll need to have a designated beneficiary on the policy first. This individual will be responsible for the money and can use any funds received to pay off the car finance.
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What happens if you don’t pay car finance?
If you can’t afford your car finance payment any longer, the last thing you should do is simply miss the payment. Find out what to do if you can’t pay back your car finance.
Can you transfer car finance to another person?
You may want to transfer car finance because you want to apply for a new form of credit, are struggling to meet the repayment schedule or want to boost your affordability for finance. Find out if it’s possible.