Peter writes:
My question is about getting out of a car lease.
Last night I was speaking to a recent widow. A few months before her husband died, he had taken out a lease on a 2010 car. She still has 14 months to go on the 36-month lease for a 2009 Toyota RAV4. She doesn’t need to carry the lease on two vehicles and wants to hold on to the newer one.
The RAV4 has 18,000 miles and the lease is $359 a month, which is high (there’s no deposit). That leaves about 18,000 miles for someone to take it over before it expires in Feb. 2012.
She’s listed it with Swapalease and isn’t getting any interest there. I’ve also mentioned Leasetrader.com, CarLeaseDepot.com, and EasyRelease.com as alternatives, but don’t know their reputations. And of course there is Craigslist.
Can you think of other alternatives that might be helpful for getting out of this, including negotiation with Toyota Financial if such a thing is possible? Thank you.
Sajeev Answers:
I see negotiation with Toyota Financial as hit or miss, is there any motivation for a sales/customer service person to tell you what you need to hear? Odds are talking to a lawyer familiar with estate planning is probably a better way to find out the truth about ending a lease in your state. I can speculate, but this time I’d prefer not to.
Getting out of a lease is ugly, and that’s by design. And a lease on a boring (sorry) car is a hard sell, especially with the down payment (wisely) rolled into the deal. A would-be buyer would prefer the seller had the low payment, and I am sure they can find plenty of “comps” where the seller wasn’t savvy enough to roll in the down payment into the (usually) low lease money rate. There are reasons why leasing is normally suited to upper-echelon cars, and this is one of them.
Unfortunately, I think this lady is out of luck. She will need to sell it for cash and eat the negative equity that surfaces after the ink dries on the paperwork. It’ll be painful at a Carmax type of trade in, a little less hurty with a private party sale at AutoTrader.com or Craigslist.
She doesn’t need two cars, so sell the one that has less negative equity on the deal. If this was an S-class Mercedes with a super low monthly payment, my advice would be different.
Send your queries to mehta@ttac.com. Spare no details and ask for a speedy resolution if you’re in a hurry.
Ouch! If the price won’t be too dear, see what the Estate Lawyer can do for you, otherwise I think Sajeev is right on.
What is the make and model of the ‘other’ vehicle?
If her name is not on the lease, she has zero responsibility. It will have no effect on her credit at all. Call TMFS and arrange for the pickup of the vehicle.
If her name is on the lease, Toyota will still take it back. It will be at the discretion of Toyota whether there is any mark on the credit. But typically these situations are considered to be ‘settled’ on a credit report.
Explain the circumstances and ask whether this can be done. I have yet to know of any situation where it could not be done. In fact it’s standard procedure in the auto remarketing business.
Steve is probably right, but the first person to call is the attorney who handled the lease signer’s estate. Actually, this should have been dealt with when the deceased man’s affairs/estate was settled. Since people die with debts all the time, the attorney will know what the law is, and then widow can make decisions accordingly.
When is comes to the intersection of law and finance it is not wise to assume or guess. Paying a lawyer should be the smartest, quickest, and least expensive route.
Either buy out the lease and resell it via Autotrader or Craigslist or sweeten the pot for a swapalease deal.
The first option is the most risky depending on what the residual is for that RAV. We purchased our Highlander when the lease was up and the actual value was higher than the residual.
Tossing in some cash into a swapalease deal may move it quicker, get the lease payment in the $250-300 range and she might do better. That’s putting less than a grand into the pot. Of course getting people qualified for leases is not as easy as it used to be.
You’re thinking about this the wrong way. A lease is just another way to finance a purchase – it spreads the payments out over a longer period of time (they want you in a 3-yr lease followed by a 6-year loan to purchase the rest of it). The problem is not the lease, the problem is being underwater on the car’s value. You can either call or go online and get the current payoff quote, which is just like it would be with a “normal” car loan. Chances are the payoff will be more than you can get for a trade-in at a dealer, but who knows. Both the cars I’ve leased in my life I was able to trade in about a year early, and never had to pay a dime. One dealer took the trade in straight up (and that was on a $0 down lease for a WRX) and another actually gave me $1500 cash (on an Outback).
You do have a dealer queen on your hands, though – a low-mileage late-model Toyota. I wouldn’t be surprised if you went into the dealer and begged and pleaded them to take it off your hands for the payoff amount. Chances are they’ll still make some cash on the trade, since there are 1000s of buyers looking for that “new” Toyota that just happens to be a year used.
Talk to the lawyer who is handling probate. There is no reference to what state this is in, but state laws may differ – community property may spread some liability to the spouse, for instance. Is there a death clause in the lease? Is there any non-exempt property in the estate? Depending on state law and the terms of the lease on a party’s demise, she may be able to just park it in the lessor’s driveway. Talk to the lawyer handling the probate or administration of the estate first. Just my 2 cents.
Death is considered an early termination. The estate of the deceased, or co-signer on the lease if any, must continue to pay the lease or terminate the lease early.
That’s kinda what I thought, but I am sure this varies by state. Again, chatting with a lawyer is a smart move here.
“Death is considered an early termination.”
That’s always how I’ve thought of it…
No one is going to want that lease when Toyota is slapping cash on the hood to keep sales pace.
Very, VERY good point.
http://www.truecar.com shows no incentives on the Rav. There was cash on the hood back during the spring, when my mom got her Rav, but nothing official out there now.
I’ve been very impressed with my mom’s Rav, BTW. My wife and I were meeting my parents, 2 brothers, and my middle brother’s fiance on the way to the beach this summer. They fit 5 people, suitcases, coolers, fishing poles, beach chairs, etc in that Rav. I kept telling them that there is no way that they’d get everything to the beachhouse. I was proven wrong, though. She’s getting 27 mpg in her 4WD V6, too. Great little car.
Car is probably costing her closer to $500 a month with tags, insurance, etc..
Maybe offer someone $1500 cash to take the $359 lease.
On death all property of the deceased vests in the estate (which is simply a trust) as do all obligations of the deceased and rights of creditors as against the deceased. This is before any probate and settlement/transfer of property. As such the lease should be dealt with before it passes to the wife of the deceased, if it should pass at all. This is unless the wife co-signed for the lease, then it would be more complicated with the estate partially responsible/see any indemnity clauses.
Someone above was very correct: the estate has the responsibility to settle this, the executor/executrix needs advice from the lawyer.
If the deceased was the sole lessee his estate has sole responsibility for that contract and all of the lessor’s claims for payment are against the estate.
Consult your estate lawyer.
Leave it running at a gas station in a bad part of town and let nature take it’s course.
Thanks Sajeev for posting this, and everyone else for your responses. Steve Lang had also graciously answered this is private a few weeks ago.
Unfortunately, her name is on the lease too, so Toyota Financial is doing what banks do – playing hardball. When I last checked, she was SOL but I’ll check in on her with this new info. And many of your ideas are good — even GS450G’s as a last resort!
When I was in the trust business, we had a pamphlet titled” The Joint Ownership Trap”. This is just one example of what can happen. She likely is out of luck.
If her name IS on it, hire an estate attorney.
If her name is not on the lease, she has zero responsibility. It will have no effect on her credit at all. Call TMFS and arrange for the pickup of the vehicle.
Toyota will go after the estates, mind u they could work out a more amicably plans , because it costs more $$ to sue, plus it didnt look too good to go after a widow.
Toyota could write that part off as a good will, then depends on how much did the left from the estate, if lots of $$ left then mind as well pay them off.
I am sure the lawyer would have come up with some better plans.
The equip lease plan I had did took out a life ins ( $15 mth ) , wish i had took out the disability, then I would have walk away with it too. It was another $20 more per mth.
No they won’t. Few things would garner more negative publicity for Toyota than going after a widow’s estate over a lease agreement.
She doesn’t want the vehicle. She’s nice on the phone. The vehicle is voluntarily brought back to Toyota. The End.
At Cap One Auto Finance we had tens of thousands of repos. The only times I ever recall the company going after assets is when fraud or intentional destruction of the property was involved. Otherwise the offender’s debt was sold to a collection agency whose ability to garner those assets was strictly relegated to verbal skills.
She won’t have any worries. If she’s uncomfortable with the process, an attorney can handle it for her. But the end result would likely be the same.
If she executed the lease, too, she is in the same position she’d be in if the debt was owed by the estate. It’s just a matter of whose bank account pays it. She’s probably the sole beneficiary of the estate anyway. GS650G is on to something methinks
A lot of you guys are not reading the question carefully.
The lease she wants to get out of is not her late husband’s (the unspecified 2010 car). It’s hers (the 2009 RAV4), so she can keep her late husband’s car (because it’s the newer one). So none of the advice about the lease obligation going to the estate, etc. applies here and she is definitely out of luck on that.
She might be able to get her late husband’s car lease settled through the estate, but that’s not the one she wants to get out of! And given that, what she wants is not a reasonable request of Toyota Finance (especially if the car she wants to keep is not also leased hrough them)
WOW! I missed it too, but my advice was generic enough to work either way.
14 months at $359 + other expenses is maybe $6500 – $7000 depending on insurance etc…
Every day money goes down the hole and never comes back.
Her best bet is to calculate what it would be worth to her to be rid of it in the next 30 days and create a deal that would give that a good chance of happening.
Maybe the CarMax route or maybe offer someone $1500 in cash to take over the lease at $359…
But every day that goes buy the deal gets worse for both the buyer and seller.
If she doesn’t have the cash to make a deal happen, then she pays slow.. Either way, she pays.
Ding, Ding, Ding, we have a winner!
I guess the original post was not sufficiently clear on that point but reading carefully, it does not say much about the 2010 car the widow wishes to keep, only describing the 2009 Toyota RAV 4 she leased herself and now wants to get rid off.
Assuming the deceased husband’s 2010 car is not a Toyota, Toyota has no reason whatsoever to let go of the lease for the 2009 RAV 4. If the lease for the 2010 car was also with them, it might be a good business move to accomodate the lady but between the lines I am reading that this is either not the case or Toyota not as accomodating as one would like them to be in this situation.
Agree with lw’s comments.
The worst possible outcome is to simply pay off the remaining 14 months (probably 13 now) @ $359 for about $5k.
If she wants out without getting her credit dinged, then she will likely have to pay some piece of the $5k.
The likely best case is $1,000 or so — even if it is legal fees. It won’t go away by itself without some action.
Hanging on for 13 months will, as lw noted, cost her a couple $000 of expenses on top of the $5K.
Getting out of it for a couple thousand seems like a pretty good outcome.
But, the range of likely outcomes is $0 to $5K — at least it is bounded and not a huge figure. And anything toward the lower end is not that bad, in my opinion.
Pull up in front of a liquor store with a cast of characters standing around and leave the keys in with the windows down. Have your insurance card in your pocket and don’t forget the cellphone.
So yeah, here’s the question: when does this become fraud? How foolish do your actions have to be to prove intent to defraud?
Or is it relative to your own intelligence? Do you call witnesses?
“Yes, your honor, I’ve known Jim for 15 years. I can totally believe that he’d leave his C-Class in Compton, unlocked amd running, and playing a Lyryrd Skynyrd album. Honestly, he’s as dumb as a box of hair.”
My initial thought was that $359/month doesn’t sound very high for a Rav4 lease, but I suppose it all depends on what trim level it is. Searching around leasetrader.com shows some base models running less than that, but limited models running higher.
If she put no money down at the lease inception, and rolled the taxes/tags/fees into the lease, the chances are it’s still upside down, but it wouldn’t hurt to go to some local dealers and see if any of them are willing to trade her out of it even. We’ve bought out leases from customers in the past if it was a vehicle we wanted for the used car lot and the buyout amount was in line with the trade in value.
Even if it’s a little upside down, she might be in a better position to do it that way and pay a couple thousand to cover the difference vs. paying all of the remaining payments for a car that will sit unused.
I’d be wary of just giving it back to Toyota unless some agreement is reached that it won’t negatively effect her credit situation – a repo will equal sky high interest rates on her next car loan, and since the other car is also a lease, she’ll likely need one when that one comes to term (unless she just buys something used for cash, but a lot of older people seem to like having something under warranty that they don’t have to worry about mechanically).
Consulting a lawyer might be worthwhile, but again, depending on the situatin, the lawyer’s fees might be more than the cost of just trading out of the current lease and handling the difference in value out of pocket.
PeriSoft doesn’t seem to have a sense of humor. Nor is he stuck with 359 a month for 18 months.
I bet he works for an insurance company.
Thanks everyone. My acquiantance no longer has a problem, though. Last night I found out she got into an accident with the newer car. She’s fine, but the car is totaled, and she’s going to use the Rav4 until the lease ends. I guess it’s “car-ma” but at least it’s resolved.
I knew that turning to TTAC was the right idea. The idea of being stuck in an onerous lease is one I haven’t seen discussed in practical terms anywhere else. Each of you — even GS650G — brought up things that important questions, like estate issues and the lack of clarity on a spouse’s fiscal responsibility.
Also, the idea of women dealing with car leases and loans solo is a relatively new phenomenon. As late as 1977, my mother — who earned half the household income — couldn’t get a car loan without my father’s co-signature with GMAC or their bank. I remember the GMAC guy was quite smarmy about getting the business. But when he wouldn’t agree to reasonable terms only in my mom’s name, it became his loss.
My parents then switched accounts to a bank that agreed to make her the loan at the going rate. The fact that such a thing could happen seems unthinkable now.
Don’t tell Perisoft about this, he might claim I had something to do with it.
I know someone that was in a terrible lease until a well timed rainstorm and slick road helped him find a way out of his lease he had not considered. Sometimes unconventional solutions present themselves.