Are you liable to pay the interest on a car loan when someone dies??

aliballie

Hi all

My father in law kindly took out a car loan for my husband in 2012. The amount included a short fall of £2000 (total finance £22,000) for the remaining payments of his other car. At the time of discussions with the car finance company he clearly stated that he had terminal cancer and what would happen in the event he died. We were all reassured that in the event all we would have to do is return the car to audi and any debt would be 'written off'.

This has not been the case!!

Unfortunately he died 3 months after signing, we returned the vehicle upon the advice we were given, however, the finance company have now been in touch. It turns out that as it was a voluntary repossession there is money still owed (apparently 50% of the loan value) still needs to be paid. The car was sold at auction for £13500 (we purchased the car for £13000) the remainder to be paid is near to £11000!! My husbands relationship with his step mother is very estranged and this is now causing tension between me and my husband.
I understand that we would be liable for the shortfall of £2000 but.. are we liable to pay the interest of £8000 even though we only had the car for 3 months??
Any advice would be gratefully received

JasX

I'm completely uninformed but it seems odd they would, what will they do? Sue him if he doesn't pay? Damage his credit rating?

Assuming none of you had your names on anyo of the paperwork they likely have a very weak case, debts don't 'transfer to family members' when someone dies.

They may be able to claim something against the estate possibly (input from someone knowledgable required) but the amount will be governed by what the signed loan agreement says in the small print, not what any salesman may have 'said' at the time

TonyMMM

His estate will be liable for whatever charges are applicable under the terms of the agreement he signed, and specifically what the contract says about what happens in the event of death.

If neither you or your husband are signatories to the agreement, then legally you are not liable - the moral liability is another matter.

It does sound very strange that the finance company were willing to lend such an amount to someone they knew to be terminally ill.

The executor/administrator of your father in laws's estate will have to deal with sorting this out.

Tixy

If it was his loan agreement and your husband was not party to the agreement (not mentioned on it anywhere) then the deceased's estate would be liable for any debt that remains on the car finance.

Who ever is the executor of the estate would need to establish what debt is outstanding (and challenge it if they believe that the amount claimed is too high or not in accordance with the agreement).

If the vehicle was returned after a few months then the estate should not be liable for the total interest that would have been payable if the agreement had run to term. The interest should be calculated based on the daily balance up to the point that the final debt is paid in full. I would suggest that the executor asks the finance company for an explanation of the balance and a full statement listing all transactions on the account.

aliballie

Thank you so much for your comments so far.
The executor of the estate is my husbands estranged step mother. The only estate my father in law has is the house he part owned with his wife. Am I correct in thinking that if the home is owned 50/50 then it would not form part of his estate?
Thanks again

Tixy

It depends on how the house was owned. Whether it was tenants in common or joint tenants.

Tenants in common then his share of the house becomes part of his estate (from which debts should be settled and any residue dealt with as defined in his will).
Joint tenants then it passes to the other party and does not form part of the estate.

However in either instance there can still be issues with outstanding debts.
This part of the forum has people who are likely able to advise her - Deaths, Funerals & Probate

AndyT678

I don't get this at all. Am I missing something? :huh:

aliballie wrote: »

My father in law kindly took out a car loan ... total finance £22,000

So amount borrowed = £22k?

aliballie wrote: »

The amount included a short fall of £2000 for the remaining payments of his other car.

So £2k goes to settle the existing finance...

aliballie wrote: »

we purchased the car for £13000

£22 - £2 = £20. Where did the other £7k go?

aliballie wrote: »

The car was sold at auction for £13500

So 2 years after you bought a car from a dealer it was sold at an auction for £500 more than you paid for it? In my experience that doesn't normally happen.

And despite this there's still £11k outstanding?

Tixy

I'd read it that £22k would be the total amount payable under the agreement. Of which £13k new car, £2k old debt and £7k finance/interest.

But could have mis-interpreted.