What is CS finance?

A Conditional Sale (CS) agreement is a type of car finance where you become the legal owner once the final payment is made. While you're making payments, you’ll be the car’s registered keeper, responsible for maintenance and servicing, with no mileage limits.

In a CS finance arrangement, the finance company buys the car on your behalf. You repay the car’s value and interest over the contract term, gaining full ownership once the amount is settled.

You’ll start with a deposit, and your monthly payments cover the remaining cost, including interest. Unlike some other finance options, there are no extra fees at the end of the contract.

How does it work?

With a Conditional Sale agreement, you start by paying a deposit, typically around 10% of the car’s price. A larger deposit reduces your monthly payments, while a smaller deposit increases them, so it’s important to carefully weigh your options.

Your monthly payments are spread over a set term, usually between two and five years. Once all payments are made, you’ll own the car outright, with no additional fees at the end.

In this type of car finance, the lender buys the vehicle from the dealership on your behalf. You then repay the loan in fixed monthly instalments, including interest, until the full amount is settled.

To see how a Conditional Sale agreement could work for you, use our online car finance calculator. Enter the loan amount, term, and your credit score to get an estimate of your monthly payments.

How long is a conditional sale car finance agreement?

CS agreements typically last between 12 and 60 months (1 to 5 years), depending on the lender and your financial situation.

Conditional Sale agreements run from 36 to 60 months (3 to 5 years). During this period, you’ll make fixed monthly payments, and once the final payment is made, the car is yours.

Can I change my car during a CS agreement?

You can’t transfer your finance agreement to a different car, but you can settle the agreement early if you want to upgrade.

Part exchange is possible during a CS agreement, though since you don’t own the car outright, there are typically only two options available. For more details, see our guide on how to part exchange a car on finance.

If you prefer changing cars regularly, leasing may be a better option. However, if your goal is to own the car at the end of the agreement, CS finance could be the right choice for you.

Conditional sale advantages and disadvantages

Let's analyse the benefits and drawbacks of CS finance now that we've understood how it works.

Advantages of conditional sale

Conditional sale agreements offer several benefits. One key advantage is the straightforward approval process. As long as you make your payments on time, the terms can be flexible to meet your needs, reducing the risk of falling into debt. Other advantages include:

• Affordability: CS finance can sometimes be cheaper than other car finance options, depending on your agreement.
• Legal ownership: Once all payments are complete, the car becomes yours with no extra fees.
• Higher approval rates: Since the car acts as collateral, lenders are more likely to approve your application, even if your credit score isn’t perfect.

Disadvantages of conditional sale

One key disadvantage of a Conditional Sale agreement is that you can’t swap your car for a new one at the end of the contract. Consider the following drawbacks:

• No ownership until full payment: You don’t have the right to sell or modify the car until you’ve fully paid off the loan.
• Repossibility risk: If you miss too many payments, the lender can repossess the vehicle.
• Higher monthly payments: Monthly repayments are usually higher than those in a Personal Contract Purchase or lease agreement.

Can I cancel the conditional sale agreement?

Yes, you can cancel your conditional sale agreement before it ends. To do this, you must pay any outstanding amounts due up to the cancellation date. If you’ve paid less than half of the car’s price, you may still owe money, as the lender is entitled to this under the agreement.

If you’ve already paid more than half, you won’t receive a refund, but you also won’t need to make further payments.

Conditional sale finance alternatives

While a conditional sale agreement is a popular and affordable way to finance a car, it might not suit everyone. Fortunately, there are plenty of other car finance options that can help you find a vehicle within your budget. Here are some alternatives:

Hire purchase agreement (HP)

Similar to a conditional sale, a hire purchase agreement allows you to finance the full cost of the car. However, unlike a CS agreement, you don’t automatically own the car at the end of the contract. You’ll need to return the vehicle to the dealer once all payments are made, unless you choose to pay a final fee to purchase it.

Personal contract purchase agreement (PCP)

With a Personal Contract Purchase (PCP) agreement, you delay paying a portion of the car’s price until the end of the finance period. When the contract ends, you can either pay off the remaining amount and keep the car or trade it in for a new one.

Bank vehicle loans

Bank car loans are unsecured personal loans that can be used to buy a new or used vehicle. However, bank loans don’t always offer better interest rates than dealerships. As a result, the interest rates on personal loans can be higher and less predictable.

CS vs HP finance

When compared to CS loans, HP agreements are often much shorter in length. This is one of the benefits associated with HP agreements. They typically last between two and five years, while a conditional sale repayment term might last up to seven years.

Furthermore, interest rates for HP auto financing are lower than those offered by CS. The final terms of an HP agreement are negotiable with some lenders, and you may even be able to buy the car at the end of the contract with others.

CS finance vs PCP finance

Both CS and PCP finance allow you to drive away in a new car without paying the full price upfront. However, there are key differences between the two.

With a CS agreement, you typically pay higher interest rates because the lender can’t take the vehicle if you default on the loan. In contrast, some PCP agreements offer lower interest rates, but the car may be repossessed if payments are missed.

PCP agreements usually require a deposit, though this varies by lender. Once you’ve agreed on a mileage limit and contract length, you make fixed monthly payments, similar to CS finance. At the end of a PCP contract, you have three options:

• Pay a final fee to keep the car.
• Return the car and avoid extra costs.
• Swap the car for a new one and continue your payment plan.

CS finance vs a bank loan

With a bank loan, you own the car outright from the moment you purchase it. Unlike CS finance, you don’t have to wait until the end of the agreement to become the legal owner.

One downside of bank loans is that they may require collateral, such as property or other assets. In contrast, CS finance only allows the lender to reclaim the car if you miss payments.

Final words

The decision to get into a conditional sale agreement is totally up to you, but generally speaking, conditional sale financing is a suitable option for people who want to drive the best vehicle in their neighbourhood.

So, there you go! You now have all the information you require regarding CS finance. If you want to save money and time, it's in your best interest to get expert advice on the finance subject and weigh up all your options before moving forward.