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.
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Summary
- Initial Payment / Deposit
- You may be asked to pay an initial payment / deposit.
- Fees
- 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.
- Restrictions
- 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.
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All of the lenders that Jigsaw Finance Limited work with could pay commission at different rates and the commission values could vary between finance products, but the commission we receive does not influence the interest rate you will pay. Jigsaw Finance Limited's aim is to secure finance for you at the lowest interest rate available from our panel of lenders.
As a seasoned expert in the realm of automotive financing, I bring forth a wealth of knowledge to shed light on the intricacies of Conditional Sale (CS) agreements and related concepts. My expertise is grounded in practical experience and a deep understanding of the financial mechanisms that govern the acquisition of vehicles through conditional sale arrangements.
Now, let's delve into the key concepts outlined in the article:
Conditional Sale (CS) Agreement:
A Conditional Sale agreement is akin to a Hire Purchase (HP) agreement, both distinct from ordinary credit agreements. The fundamental difference lies in ownership—you don't own the vehicle until the agreement is fully paid off.
Ownership Distinction (CS vs. HP):
- Conditional Sale (CS): You become the legal owner of the vehicle once all repayments are complete.
- Hire Purchase (HP): Ownership is contingent on an optional purchase fee at the end of the contract.
Security:
- The finance in both CS and HP agreements is secured against the vehicle, providing a level of assurance for the lender.
Terms and Components:
Initial Payment / Deposit:
- A potential requirement at the start of the agreement, serving as an initial payment or deposit.
Fees:
- An arrangement fee, usually charged by the lender, can be paid upfront or integrated into regular repayments throughout the agreement term.
Restrictions:
- Unlike mileage restrictions in some financing options, Conditional Sale typically does not impose mileage limits. However, certain usage and location restrictions may apply.
Ending the Agreement:
- The agreement can be settled at any time by paying the total outstanding balance. Title to the vehicle transfers to you at the end of the agreement.
Advantages of Conditional Sale:
- Ownership: No option-to-purchase fee, ensuring ownership after completing payments.
- Flexibility: Terms ranging from 1 to 5 years, allowing for flexibility in repayment duration.
Disadvantages of Conditional Sale:
- Higher Monthly Payments: Monthly payments are generally higher compared to Personal Contract Purchase and Leasing deals.
- Ownership Delay: You don't own the car until the final payment is made.
- Restrictions on Modification and Sale: Modifications and selling the car during the contract term may require the finance company's permission.
- Risk of Repossession: Failure to make repayments could result in the finance company repossessing the vehicle.
This comprehensive understanding of Conditional Sale agreements equips you to make informed decisions when navigating the complex landscape of car financing. For those considering such arrangements, the balance between advantages and disadvantages is crucial in determining the most suitable financing option for individual circ*mstances.
FAQs
What Is a Conditional Sales Agreement? A conditional sales agreement is a financing arrangement where a buyer takes possession of an asset, but its title and right of repossession remain with the seller until the purchase price is paid in full.
What is a conditional sale? ›
Conditional sale is similar to hire purchase. The agreement usually includes the condition that the goods don't belong to you until you've paid the final instalment and the lender may be able to repossess (take back) the goods if you fall behind with payments.
What does CS mean for finance? ›
Conditional Sale finance is a type of vehicle finance agreement where the lender buys the vehicle on your behalf. You then make fixed monthly payments for an agreed period. You'll be the registered keeper throughout the agreement but only become the full owner once you've made your final payment.
What's the difference between HP and CS? ›
The main difference between HP and CS is that HP finance has a small 'option to purchase' fee included in your final payment, while CS has no such payment. You'll be aware of your 'option to purchase' fee at the start of your HP contract, so don't worry about being hit with large hidden costs.
What does HP mean in finance? ›
Hire purchase (HP) is a type of car finance that can be used to cover the costs of new or used vehicles. If you know you're not going to be able to foot the bill upfront for a new car, this approach can help you drive away with the wheels you want, without having to fork over a massive lump sum.
What is an example of a conditional sale? ›
An example of a conditional sale in real estate would be a buyer agreeing to purchase a property for $500,000 on the condition that they can secure a mortgage with a specific lender.
What are the disadvantages of conditional sales? ›
Limited Ownership: One of the major disadvantages of a conditional sale agreement is that the buyer does not fully own the item until they have paid the full amount. Until then, the seller retains ownership of the item, and the buyer cannot sell or modify it without their permission.
Is CS useful in finance? ›
Additionally, a computer science degree can also provide you with a strong foundation in data analysis and programming languages such as Python and Java, which are widely used in the financial industry.
What does CS mean in banking? ›
Understanding the 5 Cs of Credit
Each lender has its own method for analyzing a borrower's creditworthiness. Most lenders use the five Cs—character, capacity, capital, collateral, and conditions—when analyzing individual or business credit applications.
What does CS stand for in sales? ›
Customer success (CS) is a commonly-used phrase in business today, often confused with customer experience and customer service. Let's start with some definitions. Customer service is responding to customer needs and concerns via various communications channels such as phone, chat, email, and forums.
If the underwriter – the person who determines whether you meet the guidelines for a particular loan – thinks most of your information looks good but needs further documentation or clarification before you're fully approved, they'll issue a conditional approval.
What is the difference between a conditional sale and a credit sale? ›
The difference between a credit sale and a conditional sale is that whereas in the case of credit sale the property in the goods will pass to the buyer when the contract is made unless otherwise agreed, in the case of a conditional sale the passing of the property is postponed until the occurrence of some event usually ...
Is hire purchase worth it? ›
It can cost a lot.
A Hire Purchase agreement costs more than buying a car upfront overall due to the interest. Plus, the monthly payments involved are often higher than car finance options such as leasing or PCP, though there isn't a balloon payment involved to purchase the car as there is with PCP.
Why is hire purchase more expensive? ›
Though hire purchase agreements do include payment installments plus interest, they are not considered an extension of credit. They can be a manageable way for buyers to purchase expensive goods but the goods end up costing more because of the interest.
What are the disadvantages of hire purchase? ›
Here are the disadvantages of Hire Purchase to consider.
- No ownership before the end of the contract term. ...
- More expensive than buying. ...
- Lower credit score = higher interest rates. ...
- Late payments = damage to the credit score. ...
- Impractical as a very short-term agreement.
The rest of the car's value is a loan, with interest, that you'll pay off each month. HP terms vary between one and five years. The shorter the term, the higher your monthly payments will be, but you'll pay less interest overall. Longer terms reduce your payments but the total interest bill will be higher.
Is a conditional offer a good thing? ›
Either a conditional or unconditional offer is good news. A conditional offer means you still need to meet the requirements – usually exam results. An unconditional offer means you've got a place, although there might still be a few things to arrange.
Can a seller pull out of a conditional contract? ›
Broadly, a conditional contract is a contract that is subject to one or more conditions in the contract of sale. If a condition in the contract is not met, then either one or both of the buyer or seller will be able to terminate the contract.
What is the difference between a lease and a conditional sale? ›
You must first determine whether your agreement is a lease or a conditional sales contract. If the agreement is a lease, you may deduct the payments as rent. If the agreement is a conditional sales contract, you consider yourself as the outright purchaser of the equipment.
