Who’s planning on dying? Not us! As motorcyclists we have a lust for life but we’re all too familiar with the potential to shuffle off this mortal coil. Despite what your friends and family might think, you’re not planning on dying any time soon.
Death is never an easy subject but it’s worth giving it two minutes of thought before you sign your motorcycle finance contract.
You might well assume that if you die, your finance contract is null and void and the amount owed just disappears. Not so, I’m afraid. The finance company is still entitled to get back the money they are owed and you can bet they’ll be unyielding in their pursuit for payment. The Hire Purchase Act 1964 ( 15 /16 / 17 ) covers most of this subject.
A lease is different to a loan. If you lease your motorcycle or scooter, you’re renting the bike, not borrowing money to finance it and if you died, the lease company would recover your motorcycle and would wrap-up your agreement.
There are various ways to finance a new motorcycle, from Hire Purchase, to Personal Contract Purchase to a personal loan – there are myriad finance options you can choose from. Whichever option you choose, the debt will remain in the event of your death and it will need settling in one of the following ways:
If your agreement involves a guarantor, the responsibility will pass to them. They will then either keep up the monthly payments and see out the contract that way or settle the contract by paying off the outstanding loan amount.
If your agreement is a joint agreement, with a partner or a spouse named on the contract then the responsibility will pass to them. Again, they could see out the agreement or settle it outright.
If you are considering taking out a finance agreement and you don’t have a will, now is the time to consider getting one. A will takes around an hour to draw up and most solicitors will be happy to advise you. A will ensures you appoint an executor which gives them the right to manage your estate on your death, ensuring they can quickly settle your outstanding debts.
If you die without a will, life gets complicated for those directly connected to you, so consider taking the time to make a will, it WILL save everyone hassle.
When you die, you leave behind an estate. This isn’t a smokey old Volvo estate or indeed a massive country house rather it is a list of all of your property.
If you have a mortgage, loans and of course, funeral bills, these will all be settled by your estate.
There are two types of loans, secured and unsecured – both need addressing should you die with either outstanding.
Personal Contract Purchase and Hire Purchase agreements are both secured loans. Your motorcycle or scooter belongs to the finance company until you’ve finished your agreement with them. If you die before the end of this agreement, the finance company are legally entitled to take your motorcycle back and sell it at auction. Whatever they achieve at auction, less their fees, will be deducted from the total amount you owe on the motorcycle. Your estate will then owe the finance company the outstanding amount.
Your will executor can also bring the voluntary termination clause into effect, this is section 99 of the Consumer Credit Act. This termination of your finance agreement can be enacted if you have paid 50% of the total amount owed at the start of the finance agreement. If you are short of the 50%, your estate can pay the amount required to bring the total to 50%. When this termination occurs, the finance company will collect your motorcycle with nothing left for your estate to pay. Given the bigger picture, this is a useful clause to use if you are short of the 50% total paid, seeing as it is unlikely the beneficiaries of your will, will want your motorcycle. Especially not if you died on it.
An unsecured loan is a personal loan and is part of your estate, i.e. the vehicle is owned by you. If you die, your estate will still need to settle the outstanding loan. The loan company will come after your estate for the outstanding debt but they won’t come after your vehicle.
Your estate executor can either use the funds in your estate to pay off the debt and keep the vehicle (it might be that you’ve left it in your will to a friend or relative) or sell the vehicle to pay off the debt.
It’s important to note that if you fail to settle the debt, costs can mount up as the loan company chase for the debt to be settled.
For any loans, from bank loans, to mortgages, the companies involved will issue your estate with a statement for the money owed. It’s entirely possible that your estate doesn’t have the funds to pay off all of your debts.
When it comes to settling debt, your (estate’s) negotiating position will change depending on how much money you owe or how far you are into your agreement with the company helping finance your bike. It’s worth seeking legal advice here but if your remaining debt is low, it’s well worth settling any outstanding finance, especially if that entitles your estate to own the vehicle which can then be sold to help settle any other debt. However you should also remember the 50% Voluntary Termination amount and how much money you’ll need to reach this figure, as this will also solve the issue.
If there really is no money left, it is worth negotiating with the finance company. They would rather settle on a lower amount than waste time and money chasing the estate for payment which may only partially be awarded by a court and take years for them to receive.
In most cases, your insurance policy will cover any outstanding debt. Even though it might be a slightly embarrassing point to bring up, don’t be afraid to check with your insurer.