How can I take over a car loan after the death of a relative?
May 20, 2014 6:11 PM   Subscribe

It's okay with the estate, but now I need to deal with the car company. How do I make sure that I can take over the car loan of a dead relative in order to keep the (sentimental) car, keeping in mind bad credit and not enough money to pay it off entirely?

The amount left on the loan is larger than the value of the car, by about $1K, but we don't have the cash to buy out the whole debt. Right now, the estate is on the hook for the debt left on the car, but if we can take over the car payments, it will leave more money in the estate for other heirs. The executor and everyone else is okay with this.

I've been told the company may do it, but it will require a credit check. Myself and my spouse both have pretty bad credit - high 500s, low 600s. But we have really good income which could be proven if necessary. Is there a way this can work, something we can offer? Maybe a higher interest rate? Or what is the best way to handle this?
posted by anonymous to Work & Money (10 answers total)
I think you're probably going about this wrong. The bank has a note on a car that has less value than the note. They would probably take the value and not what the loan is actually for. The assets of the estate stand against the debts. If the estate sells everything and there is still debt then the people holding the notes eat the difference.

I'd spend the few hundred bucks and sit with a lawyer and have him make an offer to the estate and the banks and see what happens. No sense you taking on an upside-down loan just for sentiment. The bank or the estate is on the hook for that debt, not you.
posted by cjorgensen at 6:46 PM on May 20, 2014 [4 favorites]

If someone keeps making the monthly payments, most likely no one will raise any question about anything.
posted by yclipse at 7:25 PM on May 20, 2014 [1 favorite]

Don't just make the payments. Even if you get away with it and pay off the car (unlikely in my opinion) you'll have title in a dead person's name. Good luck getting that worked out.
posted by COD at 7:38 PM on May 20, 2014 [2 favorites]

george apley's death cert, plus the signature of his executor on the title, would go a long way to getting that worked out. every time someone who owns a car dies, this comes up, so the dmv has seen it before. mr. jorgensen upthread has the right idea, the principal can probably be bargained down a little now, because, take your chances collecting from a corpse, or the live rube on the other end of the phone?
posted by bruce at 8:05 PM on May 20, 2014

I don't know the law in your state, but when my mom died with a car note, the dealership just repo'd the car. No heirs were on the hook for it or required to pay off the note. (I'm in Texas).

Just wanted to bring that up before recommending you do as mentioned and see if you can negotiate the balance/payments down, if you want to keep it.
posted by emjaybee at 8:47 PM on May 20, 2014 [1 favorite]

Not sure if rhe estate is on board, but the easiest thing would be to have the estate pay off the loan and then sell it to you for a loan on the same terms. Essentially, the estate becomes the lender and you pay the estate off over time.

I'd be surprised if the loan note permitted a transfer of the note. They may, but I'd imagine you'd need a credit check and underwriting and all that.
posted by jpe at 4:50 AM on May 21, 2014

Often people try to undercut the estate, and that's not legal. They will try things like having the estate pay off the note from the proceeds of other assets, then once the car is paid I give you a dollar for it. The best way to proceed is to get a fair market estimate (or three), have the estate settle the note, and you buy the car outright. Or, like I said above, approach the bank and make a lowball offer (or fair market) and see what they will do.

If it comes to financing the car you can get pre-approved for that. Even with bad credit often cars are fine because the car serves as collateral for the loan.

People think they can't afford lawyers, so they avoid them, and end up making huge mistakes. The time spent with one figuring this out will end up saving you money and stress. Get one that specializes in estate law.
posted by cjorgensen at 6:12 AM on May 21, 2014

I am the OP here. (Mods suggested posting as anon and updating with the sock as it is newly created and otherwise would have had to wait a week)

There is an estate lawyer, who has already been consulted and who, given the circumstances, told the executor it would be okay to transfer the loan. No one is trying to undercut the estate. We are trying to be scrupulously fair. The valuation of the car as less than the cost of the loan was obtained from two sources - first, Kelly Blue Book, and second, the car dealership that holds the loan themselves. Thus, for the estate, it is a negative asset.

One of the main reasons to try to lower the cost to the estate and prevent the estate from having to pay it off as a lump sum is that there is little cash money, but some real assets in the estate (heirlooms, wedding rings, etc), which everyone would like to prevent from being sold off to settle debts.

The lender has already been contacted and agreed to a transfer of the note, but said that a credit check would need to be passed. What I'm trying to figure out is if there's anything to offer them to sweeten the fact of the bad credit.
posted by sockmeamadeus at 6:49 AM on May 21, 2014

What I'm trying to figure out is if there's anything to offer them to sweeten the fact of the bad credit

A down payment would probably do it. Do you have enough money to put down 10% or 20% of the value of the vehicle?

You can also arrange your own loan through your credit union (with a down-payment) or another financeing option.

Don't do anything stupid though. If they come back with some bullshit rate (over 5%) walk away and let the dealer repo the car.

At the end of the day, a car doesn't have sentimental value. You might attach sentiment to it, but at some point the car will fall apart and it will be junked. If you like the vehicle, if you need a vehicle and if you can afford it, then good on ya. But don't let grief and sentiment and weakness get you into a situation that you can't afford.
posted by Ruthless Bunny at 9:03 AM on May 21, 2014 [1 favorite]

One of the main reasons to try to lower the cost to the estate and prevent the estate from having to pay it off as a lump sum is that there is little cash money, but some real assets in the estate (heirlooms, wedding rings, etc), which everyone would like to prevent from being sold off to settle debts.

I get this, but that's for the estate to worry about. The estate shouldn't be your charity. You should pay fair market value (or less) for the car.

One of the things I've seen in these cases (and I've seen a lot) is that emotions get tired up into what should be a straight-forward purchasing transaction. The estate has something you want. If you have money you should buy the car for what it's worth. All too often the benefactors of an estate feel taken advantage of when they don't get top dollar. This is too bad. Not your concern. There's also little that can be done to avoid this.

Financing and what happens to the estate after this transaction is completely secondary to the actual purchase.

If you take the estate out your question actually becomes a way different question.

If you can't pay cash for the car I'd advise you to take a pass on it. Period.

You already said you have poor credit. Last thing you need is an additional payment. This is coming from a place of experience, so don't take it as judgmental.

You are a bit unclear on whether the estate lawyer you spoke to is your lawyer or the lawyer for the estate. There's two different agendas in play here.

If you are convinced you need to move forward then talk to your bank or your credit union, see how much you can get approved for. If it's enough to buy the car you are set. If not you'll know that as well.
posted by cjorgensen at 9:44 AM on May 21, 2014 [1 favorite]

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