What happens to a car lease if the lessee dies ?
Car leasing with residual value allows you to lease a vehicle for a fixed term, with the option to purchase it at the end of the lease, if the provider agrees. But what happens if the lessee dies before the lease ends? What are the rights and obligations of the heirs ? LeaseTransfer, your provider for taking over or buying out your car lease in Switzerland, sheds light on these questions.
How does a car lease agreement generally work ?
Understanding the basics of car leasing in Switzerland is essential to better address the issue of the lessee’s potential death.
You can choose from various types of lease agreements: residual value leasing (the most popular type of lease, accounting for more than 90% of all car leases in Switzerland), pure rental leasing, or sale-leaseback. In all cases, this solution allows you to lease a car from a financial institution, a dealership, or a broker. The lease term generally ranges from 2 to 5 years for residual value leasing.
In exchange for the leased car, you pay fixed monthly payments that vary depending on the model and the lease term. These payments cover the vehicle’s depreciation, administrative fees, and lease interest. At the end of the lease, in the case of a lease with a buyback option, you can choose to purchase the vehicle by paying its residual value, if the provider agrees.
What happens if the lessee dies during the term of a lease agreement ?
A car lease agreement is not automatically terminated upon the lessee’s death. It therefore continues until its expiration, unless a clause provides otherwise. The heirs must therefore continue to pay the lease payments and comply with the terms of the agreement. This means they must take care of the vehicle’s maintenance, pay for comprehensive insurance, stay within the agreed-upon mileage limit, and so on.
It should be noted that the heirs may also renounce the estate, that is, refuse to inherit from the deceased lessee. In this case, they are not required to pay the lease payments or return the leased vehicle. The lessor will then have to initiate a specific procedure to contest the inheritance and recover the leased vehicle and the amount of unpaid lease payments.
In the event of the lessee’s death, several scenarios may arise. To avoid complications, it is best to always inform the lessee’s family in advance about the existence of the lease agreement and its terms.
Insurance purchased by the tenant
When signing a lease agreement, the lessee may purchase various types of insurance, such as unemployment insurance, which will cover all or part of the lease payments in the event of a break in employment during the lease term. The lessee may also purchase death/disability insurance from the company financing the lease agreement. In all cases, the lessee must purchase comprehensive auto insurance to cover all damage to the vehicle during the lease term. This may include death coverage, though it is not mandatory. The death insurance taken out upon signing the lease agreement—or auto insurance that covers lease payments in the event of the lessee’s death or disability—will reimburse the remaining monthly payments, thereby relieving the deceased’s family of this financial burden. The amount of the outstanding lease payments will be covered by the insurance, and the leasing company may request the return of the leased vehicle as well as the documents related to the vehicle (registration, etc.).
The coverage included in an insurance policy varies from one insurer to another, which is why it’s important to choose a policy that’s perfectly tailored to your personal situation. If you have any questions, please don’t hesitate to contact us so we can connect you with our insurance partners, who can provide clear explanations and a discount on your insurance premium for your leased car.
Termination of the Lease Agreement
In most cases, the leasing company will accept early termination of the lease agreement in the event of the lessee’s death. However, this early termination will result in significant penalties for early termination of the lease. The deceased’s family will therefore not be required to pay the remaining monthly payments or to purchase the leased vehicle. However, this depends on the specific terms of the lease agreement and the general terms and conditions of the financing company offering it.
The heirs may also decide to return the leased car to the lessor if the lease agreement has not been purchased out. This option will result in the early termination of the lease contract, and you will be charged an early termination fee. In this case, be sure to comply with the terms set forth in the agreement (condition of the vehicle, repair costs, mileage penalties, etc.).
If you find yourself needing to return the vehicle during the term of the lease agreement, please don’t hesitate to contact LeaseTransfer, which will work with you in advance to find a solution that is more cost-effective than returning the leased car.
The buyout of the lease agreement
With a lease that includes a buyback option, the deceased’s family also has another option: buying out the lease before it expires. The heirs will thus become the owners of the vehicle by paying its residual value at the time they wish to purchase the leased car. They will then be free to use the car or resell it if they wish. Thanks to its network of partners throughout Switzerland, LeaseTransfer can arrange for a partner to buy out your lease agreement and the vehicle covered by it if you do not have the financial means to purchase the leased car.
The Transfer of the Lease Contract
A leasing company may allow a family member to take over an existing car lease. That person may then continue to use the leased vehicle until the end of the lease term by making the monthly lease payments under the same terms as the deceased lessee.
With the lessor’s consent, a lease agreement may also be transferred by the deceased’s family to a third party. That third party will then be required to pay the lease payments until the end of the lease term and to comply with the terms of the agreement. LeaseTransfer assists you with this process of transferring or buying out the deceased’s lease agreement. Indeed, when a loved one passes away, other priorities will take precedence. For this reason, and to spare you the hassle of dealing with a leased car that you certainly won’t need, LeaseTransfer will help you find a new lessee for the deceased’s lease through its fully accompanied service for the transfer or buyout of your lease agreement.
