While prices have dropped a little in 2023, the average cost of a new small car in the UK sits at more than £21,000. Opt for larger models and RRP increases significantly. Combined with issues like inflated petrol prices and the cost of living crisis, this figure puts car ownership out of reach of most motorists. With many Brits feeling the pinch, it’s no wonder auto finance options like conditional sale have surged in popularity over recent years.

There’s plenty to learn when it comes to car finance and conditional sale is one of many terms you may recognise. But what is a conditional sale exactly and how can it help you secure the keys to your dream car? Read on as we dissect everything you need to know about conditional sales, including how agreements work, the benefits and what to expect when signing a contract.

Understanding the basics of conditional sale

What is a conditional sale and how can it help you own your own car? The term describes a popular finance model that allows you to spread the cost of car ownership over a set time period, usually between two to five years. It’s essentially a personal loan that’s secured against the vehicle and funded by a lender. The finance provider pays for the car outright and maintains legal ownership of the vehicle for the duration of the contract.

As the borrower, you make regular repayments to the lender which cover the total cost of the car, plus interest accrued over time. After making your final payment, ownership of the vehicle is transferred to you. The model is straightforward and transparent, making conditional sale a great option for Brits who like to keep things simple. It offers a direct route to ownership without complications like mileage limits, wear and tear penalties or options to return the car or renew the contract at the end of the agreement.

Whether you’re looking at compact urban commuters like the Ford Fiesta or spacious, family-friendly SUVs like the Hyundai Tucson, Conditional Sale can be used to finance a huge range of makes and models. This flexibility is another key benefit associated with conditional sales.

Conditional sale vs hire purchase

What is a conditional sale agreement and how does it compare to hire purchase? If you’re familiar with the car finance landscape, you may draw comparisons with conditional sale and hire purchase (HP). And you’d be absolutely right. Conditional sale and HP share similarities and work in almost the same way, though there’s one major difference.

When a HP agreement winds up, you’ll need to pay a modest “option to purchase” fee to assume legal ownership of the vehicle. In comparison, conditional sale sees you automatically assume ownership after the final payment is made.

How conditional sale works

Now we’ve covered what a conditional sale agreement is, here’s a step-by-step breakdown of how the process works:

  1. Choose your make and model

Like other auto finance options, conditional sale starts with choosing your dream car. Whether it’s a fresh out the showroom model or a used gem with low mileage and a great service history, conditional sale offers the flexibility to choose a vehicle that suits your personal budget, lifestyle and driving preferences.

  1. Agree on terms

When you’ve chosen your new set of wheels, it’s time to agree on the terms of your conditional sale contract. This includes the duration of the agreement, along with your interest rate.

  1. Make your deposit

Most conditional sale agreements start with an initial deposit designed to offset the total cost of the car. Keep in mind that your deposit can also help bring down your monthly payments and reduce the total amount of interest paid over the duration of the agreement.

  1. Pay monthly instalments

The remaining balance of your car loan, minus your initial deposit, is split into fixed monthly payments. These payments cover both the principal loan amount as well as interest. For many Brits, the sense of financial stability that comes with conditional sale contracts is a major benefit.

  1. Claim ownership

Unlike some auto finance options where you may have to return the vehicle or make a balloon payment at the end of the contract, conditional sale is all about easy ownership. After the final payment is made, you’re officially the legal owner of the car.

Why choose conditional sale?

Knowing what a conditional sale is gives you a few clues as to why it’s so popular with British motorists. Here’s a closer look at some of the top benefits:

A road to ownership

Ownership is the end goal of conditional sale contracts. Your payments cover the cost of the car which means you’re continually working towards ownership. There are no mileage restrictions, hidden costs or headache-inducing calculations to navigate. Instead, simply make your final payment and drive away as the legal owner of the vehicle.

No balloon payments

For many motorists the concept of balloon payments used in models like PCP can be frustrating. In contrast, conditional sale distributes the total cost of the car evenly over a pre-determined time period. This can make budgeting more predictable and means you’ll enjoy full ownership at the end of the lease.

Mileage flexibility

Conditional sale liberates you from the mileage caps that typically accompany PCP agreements. You’re free to drive as much as you like without worrying about breaking the terms of your contract and incurring penalties.

Customisation options

With full ownership, you have the freedom to modify your vehicle as you please. Whether it’s a unique paint job, upgraded tech or personalised accessories, the car is yours to customise.

Take the wheel with My Car Credit

Ready to get behind the wheel? My Car Credit can help you secure the best conditional sale deals, tailored to your personal needs. Our friendly team is here to answer all your questions about what a conditional sale is, provide guidance and ensure your road to car ownership is as smooth and stress-free as possible.

Looking for something different? At My Car Credit we specialise in matching clients with the best auto finance options for their needs. Every motorist is different which is why a one-size-fits-all approach never cuts it. Instead, we carefully assess every application to find the perfect match.

As well as conditional sale, we offer other popular car finance options like Hire Purchase (HP), Personal Contract Purchase (PCP) and Personal Contract Hire (PCH). It’s this open-minded approach, combined with access to a wide range of high street and non-traditional lenders, that gives us a competitive edge over other brokers.

Give us a call on 01246 458 810 to find out more or email us at enquiries@mycarcredit.co.uk.

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Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

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