What happens to a PCP or PCH agreement if the car owner dies?

What normally happens in the event of the incapacity or death of someone who has taken out a PCP or PCH agreement? Can it be transferred to a spouse? Also, is a deceased person's estate liable for any fees payable on early termination? Thanks.

Asked on 20 April 2021 by John Horner

Answered by Georgia Petrie
That's not an easy question to answer as it depends on the type of finance and the way you went about getting it, hypothetically. If you have a personal contract purchase (PCP), hire purchase (HP), personal loan or any other kind of borrowing to finance your car, that debt remains payable even in the event of your death. A lease is different because you aren't borrowing any money and are simply renting the car. A car leasing agreement will have early termination penalties that apply to ending a lease early.

If you have a guarantor, they will become responsible for the finance agreement, just as they would if you were unable to make your monthly payments. If you took out a joint agreement then the other person becomes fully responsible for paying off the debt. In most other cases, your debt will become part of your overall estate after your death. If you have a will, your nominated executor is responsible for managing your financial affairs, including your car finance debt. If you do not have a will, an administrator will be appointed – usually a next of kin.

For whoever is in charge of the estate, the process for settling the debt will become part of managing all the expenses of the estate — just like your mortgage and other debts. If they want to keep the car, this can usually be arranged if they agree to take over the contract and payments.
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