What is Conditional Sale car finance?
It might not be the most common kind of car finance but a Conditional Sale (CS) deal can suit some buyers very well
There are a variety of ways to pay for a new or used car and Conditional Sale (CS) finance is one of them. You might not have heard of CS car finance, but it’s a way of spreading the cost of buying a car if you want to own it at the end of the deal. Here’s our guide to Conditional Sale car finance.
What is CS car finance?
Conditional Sale car finance is similar to Hire Purchase because it lets you pay an initial deposit and then monthly instalments to cover the cost of a new car.
CS car finance is essentially a loan from a finance company to pay the dealer for the car and you then pay back the finance provider. This will include interest.
You can use CS car finance to buy a new or used car, so it is more flexible than some Hire Purchase or Personal Contract Purchase agreements that tend to stick with new cars.
With a CS car finance deal, you pay an upfront deposit and then monthly instalments until the contract is finished. At the end, you own the car outright with no additional costs or fees. At this point, you also become the legal owner – while repaying the CS deal, the finance company owns the car.
How does CS car finance work?
Conditional Sale car finance offers an affordable way to pay for a car you want to own outright at the end of the deal. These deals usually run for between one and five years depending on how much you want to repay each month.
You pay an initial deposit at the start of the CS deal. This is typically 10 per cent, but you can pay more or less, which will be reflected in the cost of your monthly payments. A bigger deposit will lower your monthly payments, while a smaller deposit means higher monthly costs.
You can use a CS finance deal for a new or used car, so you have more choice of what car to buy. At the end of a CS car finance deal, you own the car outright and there are no hidden extra fees.
The advantages and disadvantages of CS car finance
The big advantages of Conditional Sale car finance are you can use it to buy a new or used car, and it spreads the cost over an agreed amount of time. You can lower your monthly payments by paying the deal off over a longer period, though this will ultimately cost you more due to interest payments to the finance provider.
Another benefit of CS finance is there is no “option to purchase” fee at the end of the deal as there is with Hire Purchase agreements. As a result, there are no extra or hidden costs with a CS deal. When you make the final payment, you own the car outright.
Unlike a lease deal, CS car finance has no mileage limit, so you can drive as many miles as you like.
A downside of a CS deal is you don’t own the car until the end of the deal, though you are the registered keeper and responsible for road tax, insurance, and the MoT if needed.
Monthly payments with a CS are higher than a Personal Contract Purchase deal as you are paying off the full value of the car. And lastly, you must keep up the payments or risk the car being repossessed and you getting a poor credit rating.
Conditional Sale (CS) vs Hire Purchase (HP)
A Conditional Sale car finance deal and Hire Purchase (HP) agreement are very similar.
With a CS deal, you are registered keeper of the car and then own it outright at the end of the repayment term. However, with HP you need to pay a fee called an “option to purchase” to own the car and this can be included in the final payment. If you choose not to pay this, you don’t own the car and hand it back to the finance company. With CS, you automatically own the car.
Frequently Asked Questions
Yes. You can make larger monthly payments to settle the outstanding balance sooner, which is known as an “early settlement.” Or you could pay a large lump sum to pay off the entire balance. You will need to ask the finance company for a “settlement figure” to know how much this will cost you.
In most cases, so long as you have paid more than half the agreed sum of money, you can settle the contract with no additional fees.
If you decide to end the contract early, this is called “voluntary termination” and you will have to hand back the car. If you have paid less than half the agreed finance amount, you will have to continue paying until you make the halfway amount.
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