If you’re a senior and are considering a lease, heed the words of my attorney: “Leasing a car is only for young people.”
I was at the attorney’s office going over paperwork after the recent passing of my father. He had two years left on his auto lease.
My mother was shocked to find out that while the dealer would take back the car, she wasn’t entitled to any refund.
Mom is not alone. Every year, people are stunned to learn that death does not get you out of a car lease. The deceased’s estate still owes the full amount of the lease.
Your untimely demise isn’t considered a tragedy by your dealer. It’s considered “early termination” of the contract. Really pulls at the heartstrings, doesn’t it?
The deceased’s estate may catch a break and not be on the hook for the entire amount if the dealer auctions off the car. In that case, the difference between what is owed in the contract and the auction price is what the estate will pay.
So if you owe $15,000 on the lease and the dealer auctions the car for $12,500, your estate will still pay $2,500. But there will likely be other fees added. The dealer may charge a repossession fee, particularly if it has to come collect the car, a reconditioning fee and an early termination fee.
Every auto company and dealer is different as are the terms of their contracts. Some are more lenient than others. But unless otherwise specified in the contract, assume that you or your family will be required to satisfy the terms of the contract even in the event of the death of the person leasing the car.
Here are a few things you can do to protect yourself.
- Read the contract, specifically the part about “early termination.” Don’t take the salesperson’s word for it that the car can be returned with no penalties. Ask them to point out where in the contract it spells out the terms of early termination in the event of death.
- Consider lease swapping sites. There are several places online where you may be able to transfer your lease to someone who is interested in taking it over. You may not get the full value of your lease, but that can probably put a dent in it. Swapalease and LeaseTrader are two leading sites. They will typically check to see if your lease is eligible for transfer. There may be fees associated with transferring the lease, but those are often paid by the buyer of the lease (you are the seller).
- Ask the leasing company to allow you to transfer the lease to a relative. As long as the dealer is getting its money per the terms of the contract, it should be willing to work with you.
Rather than leasing a car, consider doing what I do and recommend in my book You Don’t Have to Drive an Uber in Retirement – buy a fairly new, used car instead.
I typically look for a car that’s 1 or 2 years old with less than 20,000 miles on it. That way, someone else has taken the depreciation for driving the new car off the lot. A new car depreciates as much as 11% one minute after purchase and 25% one year later.
And should something happen to the owner of the used car, the family has an asset it can easily liquidate (depending on the details of the owner’s will and probate), rather than having to fight with a leasing company or going through a third party to transfer the lease.