Death is considered early termination of a car lease.

[MomToOne]

Okay, here is something that doesn't add up to me.
He had the car a year.
He had a 3 year lease.
He still owed $27,470.68 on the lease.
What? That's more than the car should have SOLD for, not counting the 9 to 12 payments he had already made, and he was LEASING it, not buying it.
That's a lease payment of over $1,100 a month.
Looking at the local Toyota dealer website, that car leases for $149 a month with $2,999 down for 24 months for a total of payments of $6,575, NOT $27,000+

Saying the man owned $27K+ on the lease is a bad way to phrase it - more properly, the calculated residual value of the car per the lease agreement at this point was 27K. So the car needed to sell for that much to buy out the lease early. And it didn't. So the estate ended up owing the rest.

Look at it this way. You lease a car today valued at $30K new. The finance company calculates that they will be able to sell the car at the end of the 2 year lease you are signing for $20K, so you are given a lease payment of about $425/month. But that car actually loses resale value the minute you drive it off the lot - say it goes down to $28K. You pay one month of your lease but decide the next month to turn the car back in. Toyota will take it back as an early termination and sell it - but they only get the $28K the market now says its worth. That doesn't mean that life is well and good for you since you paid your $425 lease payment. You in fact still owe the finance company the $1575 the car lost in value beyond what you paid in the month you had it.

Leases are NOT rental cars. People cause more confusion in the long run trying to classify them that way. Residual values are tricky. In a lease, you are basically paying for the depreciation of a car over the time you sign the lease for. They are calculated so that the finance company is whole at the end of the lease - that doesn't mean there isn't a gap like I described above for a significant portion of the lease. If you turn things in early, that messes with all the calculations. And that's why early termination charges kick in.

 

[MomToOne]

If the charges are legit, and that's a big "if," then the estate, if any, is liable.

The charges are absolutely, positively legit. I can assure you the Toyota Finance lease agreement spells all of this out.

 

[tvguy]

Saying the man owned $27K+ on the lease is a bad way to phrase it - more properly, the calculated residual value of the car per the lease agreement at this point was 27K. So the car needed to sell for that much to buy out the lease early. And it didn't. So the estate ended up owing the rest.

Look at it this way. You lease a car today valued at $30K new. The finance company calculates that they will be able to sell the car at the end of the 2 year lease you are signing for $20K, so you are given a lease payment of about $425/month. But that car actually loses resale value the minute you drive it off the lot - say it goes down to $28K. You pay one month of your lease but decide the next month to turn the car back in. Toyota will take it back as an early termination and sell it - but they only get the $28K the market now says its worth. That doesn't mean that life is well and good for you since you paid your $425 lease payment. You in fact still owe the finance company the $1575 the car lost in value beyond what you paid in the month you had it.

Leases are NOT rental cars. People cause more confusion in the long run trying to classify them that way. Residual values are tricky. In a lease, you are basically paying for the depreciation of a car over the time you sign the lease for. They are calculated so that the finance company is whole at the end of the lease - that doesn't mean there isn't a gap like I described above for a significant portion of the lease. If you turn things in early, that messes with all the calculations. And that's why early termination charges kick in.

I understand that. But that residual value is more than the car should of sold for, let along what it's value would be 3 years later at the end of the lease.

 

[MillauFr]

$2,300? Why didn't she just pay and make the whole thing go away? It isn't like the finance company is cheating her?

 

[MomToOne]

I understand that. But that residual value is more than the car should of sold for, let along what it's value would be 3 years later at the end of the lease.

27K is not what the car would be valued at at the end of the lease - that was it's current residual value per the lease agreement. They are two completely different things. The depreciation you are paying for in a lease is essentially spread evenly across the time period you are leasing for to determine the current residual value. But because of the way a new car actually depreciates - there is a huge chunk of depreciation the minute you drive it off the lot - the two are out of whack for a large portion of the lease. And when you terminate the lease early, you are responsible for covering the difference between the current residual value per the lease agreement, and the actual selling price. That's why it is usually a bad idea to buy a lease out early - if you decide you want to keep the car, you should almost always wait until the end of your lease THEN buy it.

Also - there are 2013 Prius models that would have sold for well over 30k - here's one: http://www.kbb.com/toyota/prius/201...id=382196&intent=buy-new&options=5152032|true (and there are additional option packages that could be added to take the price even higher)

 

[carmelhp]

The charges are absolutely, positively legit. I can assure you the Toyota Finance lease agreement spells all of this out.

Where can the complaint be found? They taught us in law school not to take anyone else's word on what is "legit."

 

[carmelhp]

Okay, here is something that doesn't add up to me.
He had the car a year.
He had a 3 year lease.
He still owed $27,470.68 on the lease.
What? That's more than the car should have SOLD for, not counting the 9 to 12 payments he had already made, and he was LEASING it, not buying it.
That's a lease payment of over $1,100 a month.
Looking at the local Toyota dealer website, that car leases for $149 a month with $2,999 down for 24 months for a total of payments of $6,575, NOT $27,000+

Say the $6,575 is true, and we treat this as a true lease, instead of a financing lease. If this were treated as a true lease, there wouldn't be any offset from the sale and the full of the remaining lease payments would be due, presumably $6,575 as you cited.

 

[Iowajes]

No, she is not "on the hook" so to speak. If the charges are legit, and that's a big "if," then the estate, if any, is liable. There may be no estate if everything was owned jointly, except the car, and it all passed to her outside probate, as a survivor or beneficiary, depending on state law.

It must depend on the state. I am used to community property states. If one spouse takes on debt during the marriage, it is the other spouses debt as well.

But in a non-community property state, if she is, as she is saying "the estate", well, the estate does have to pay the debts acquired.

 

[carmelhp]

It must depend on the state. I am used to community property states. If one spouse takes on debt during the marriage, it is the other spouses debt as well.

But in a non-community property state, if she is, as she is saying "the estate", well, the estate does have to pay the debts acquired.

Presuming that this is in CA (community property state), which is not a state I'm admitted in, and this isn't legal advice. I looked up their probate statutes and it looks like half of whatever passed to her as joint property or by operation of law other than a will, is subject to creditors, assuming they filed a timely claim. However, it doesn't look as if it treated as her personal debt in full. I gleaned that from my very quick reading of the statute, a CA attorney may have a different perspective.

 

[MomToOne]

Where can the complaint be found? They taught us in law school not to take anyone else's word on what is "legit."

There is no lawsuit to reference yet best I can tell, just a collections letter from a law firm upon the receipt of which the person being collected from complained to a news station. The link to the story is in the first post.

The termination fees are all spelled out in the Toyota lease agreement, however I cannot disclose one. You can believe me or not, your choice. Toyota does mention early termination fees can be substantial on their website, and says to reference your specific lease agreement for a list of these fees: http://www.toyotafinancial.com/cons...true&_pageLabel=pg_LeasePrgDetailsPage_unsctf

 

[carmelhp]

There is no lawsuit to reference yet best I can tell, just a collections letter from a law firm upon the receipt of which the person being collected from complained to a news station. The link to the story is in the first post.

The termination fees are all spelled out in the Toyota lease agreement, however I cannot disclose one. You can believe me or not, your choice. Toyota does mention early termination fees can be substantial on their website, and says to reference your specific lease agreement for a list of these fees: http://www.toyotafinancial.com/cons...true&_pageLabel=pg_LeasePrgDetailsPage_unsctf

Thanks, but I like to withhold judgment until there is actual evidence. A demand letter or news story does not prove a debt is owed, that everything was correctly applied, or that there is any legally collectible estate from the widow.

 

[MomToOne]

Thanks, but I like to withhold judgment until there is actual evidence. A demand letter or news story does not prove a debt is owed, that everything was correctly applied, or that there is any legally collectible estate from the widow.

That's fine, but then I don't think you should be saying things like it's a "big if" that a debt is owed, like you did in your first post on the matter. You in essence rushed to a judgment that a debt was probably NOT owed with that statement. If you choose to withhold judgement, then I think you need to do that evenly on both sides.

 

[keri125]

I suspect someone in Toyota PR is going over to Toyota Finance today with a big hammer, and after they hit a few people over the head, Toyota Finance will send someone out to apologize and tell this lady and tell her she doesn't owe a penny.

An attempt to collect $2,352.72 generated tens of thousands of dollars in bad publicity. While it may be legally correct, from an ethical and PR standpoint, this is a classic bonehead mistake.


http://www.latimes.com/business/la-fi-lazarus-20140321,0,2080849.column?track=rss#axzz2wXQPy4IT

Something slightly similiar happened to me, actually. My ex-husband passed away suddenly from a cardiac arrest in Oct of 2012. He had recently bought (not leased, so I understand that is different) a used car, just months before he died. He still owed about $4500. He did have an estate and due to other family issues (our son is a minor and his mother is elderly), my dad became executor of the estate. He's just now wrapping up selling the estate and settling debts, but unfortunately, the car loan is probably not one that will be settled, as the bulk of the estate money went to pay off back taxes that were not filed. If there is any money left over, we will definitely try to get the bank their money (of course the car was repossesed shortly after his death), but no promises. My dad thinks they will most likely drop the debt as it wasn't for much ($5000), but as his life insurance listed me and the estate as beneficiaries, there is the possibility they will come after me for the money. (He doesn't think it will happen, but it could.) I'm with other posters who are questioning the idea that just because someone dies all debts are forgiven. Generally someone still has to pay them. I was grateful we had been divorced for two years before he died, as there were SO MANY debts I wasn't aware of until after he died. As it was, I was still responsible for the joint taxes he said he paid in 2008 (which weren't, and I was garnished for awhile until they were paid, even after he died) and for the second mortgage we took out (luckily was able to cut a deal with the mortgage company). I had to deal with all this AFTER we were divorced... I can imagine what the companies might go for when someone is still married.

 

[carmelhp]

That's fine, but then I don't think you should be saying things like it's a "big if" that a debt is owed, like you did in your first post on the matter. You in essence rushed to a judgment that a debt was probably NOT owed with that statement. If you choose to withhold judgement, then I think you need to do that evenly on both sides.

Yes, "if" means that it's uncertain. "Rushing to judgment" would be something like, "it's certainly legit" or the converse, "it's certainly not legit." Neither of which I wrote or anything like it. I'm merely skeptical of collection agencies and their tactics (yes, the law firm is acting in the role of a collection agency under FDCPA).