Conditional Sale Explained

What is Conditional Sale?

A Conditional Sale (CS) agreement is similar to Hire Purchase (HP).

These are different from ordinary credit agreements because under CS and HP agreements you do not own the car until you have paid off the agreement.

The key difference between a CS and HP agreement is that you will become the legal owner of the vehicle, once all repayments have been made to the lender, where as on HP there will be an option to purchase fee at the end of the contract before you legally own the vehicle.

The finance is secured against the vehicle.


Initial Payment / Deposit
You may be asked to pay an initial payment / deposit.
There is usually an arrangement fee charged by the lender that can be paid at the start of the agreement or included as part of regular repayments for the term of the agreement.
There are no mileage restrictions under a Conditional Sale, lenders may impose certain restrictions on the use and location of the vehicle and condition of the vehicle.
Ending the Agreement
The agreement can be settled at any time by paying the total balance outstanding to the lender. At the end of the agreement, once all repayments have been made, title to the vehicle passes to you.

Advantages of Conditional Sale

  • There is no option to purchase fee at the end of the agreement, so you would own the car once you've made all payments.
  • Flexible terms from 1-5 years (the longer the term, the more interest you will pay).

Disadvantages of Conditional Sale

  • Monthly payments are higher than for Personal Contract Purchase and Leasing deals.
  • You don't own the car until you make the final payment.
  • You cannot sell or modify the car over the contract term without the finance company's permission.
  • If you fail to keep up all your repayments, the finance company can repossess the car.