What is Conditional Sale (CS) finance?

Alisa Dan

4 November 2025

Conditional Sale (CS) finance is a car finance agreement where you pay fixed monthly instalments until the full cost of the vehicle, including interest, is repaid. Once the final payment is made, ownership transfers to you automatically, with no extra purchase fee.

During the term, the finance company owns the car, and you act as the registered keeper responsible for tax and insurance. The car serves as security, so it can be repossessed if payments are missed.

CS finance suits those who want to own the car outright through clear monthly payments and automatic ownership at the end.

How does CS car finance work?

Conditional Sale (CS) car finance works through a regulated Conditional Sale Agreement between the customer and the finance company. You begin with a deposit and then pay fixed monthly repayments over an agreed term (usually 2 to 5 years) at a set APR. These payments cover the vehicle’s full price plus interest.

Throughout the agreement, the finance company holds legal title, while you remain the registered keeper responsible for insurance and road tax. Each repayment reduces the balance until the final payment, which leads to vehicle ownership transfer automatically, with no option to purchase fee.

Because the vehicle acts as security, the lender may use repossession if repayments stop. The agreement is governed by the Consumer Credit Act 1974, which protects your rights and ensures affordability assessments are completed before approval.

What is the difference between Hire Purchase (HP) and Conditional Sale (CS)?

The main difference between Hire Purchase (HP) and Conditional Sale (CS) lies in how ownership transfers at the end of the agreement.

With Hire Purchase, you make monthly payments and then pay an option to purchase fee to become the legal owner. Until that fee is paid, the finance company retains ownership.

In a Conditional Sale, ownership transfers automatically after the final payment — there’s no extra fee or final step. Both agreements involve a deposit, fixed monthly repayments, and protection under the Consumer Credit Act 1974, but the Conditional Sale offers a simpler route to full ownership.

Can I change my car during a CS agreement?

You can’t simply switch the finance from your current car to a different car during a Conditional Sale agreement, because the agreement is tied to that specific vehicle, that specific customer, and that specific finance company. The finance company legally owns the car until the final payment, so you’re not free to sell or part-exchange it without clearing the outstanding balance.

You do still have options. You can request a settlement figure from the lender and pay off what’s left. Many dealers will then use the car’s value against that figure and put any positive difference towards your next car. This is sometimes done as part exchange.

You also have a legal right to Voluntary Termination. If you’ve paid at least around half of the total amount payable, you can end the Conditional Sale Agreement early and return the car, which lets you exit the contract before the end of the term.

Can I cancel the conditional sale agreement?

You can cancel a Conditional Sale agreement, but how you do it depends on when you decide to end it and how much you’ve paid.

If the agreement has just been set up and you’ve not yet taken delivery of the car, you usually have a 14-day cooling-off period under the Consumer Credit Act 1974. During this time, you can withdraw from the finance by contacting the finance company directly. You’ll still need to repay the amount borrowed, but you won’t owe any future interest.

If you’ve already had the car for a while, you can end the agreement using Voluntary Termination. This legal right lets you return the car and cancel the contract early once you’ve paid around half of the total amount payable. You must keep the vehicle in reasonable condition.

Outside these rights, cancelling means settling the finance early — paying off the remaining balance in full. You can request a settlement figure from your lender, which will show exactly how much is left to pay before the agreement is closed.

So yes, you can cancel, but the route depends on whether you’re still within the cooling-off window, exercising Voluntary Termination, or making an early settlement.

Conditional sale advantages and disadvantages

Advantages of conditional sale

You own the car automatically at the end
Once the final payment is made, ownership transfers to you without an option to purchase fee. This makes CS finance simpler than Hire Purchase.

Fixed monthly payments
The monthly repayments stay the same throughout the agreement term, helping you plan your budget with certainty.

No mileage or condition limits
Unlike Personal Contract Purchase or Personal Contract Hire, there are usually no mileage limits or end-of-term charges, since you’re buying the car outright.

Legal protection under the Consumer Credit Act 1974
You have rights such as Voluntary Termination and fair repossession procedures if you fall behind on payments.

Straightforward structure
The agreement is easy to understand — a deposit (CS05), fixed instalments, and full ownership at the end. It suits those who prefer clarity over flexibility.

Disadvantages of conditional sale

You don’t own the car until the end
The finance company keeps legal ownership during the term, so you can’t sell or modify the car without permission.

Higher monthly payments
Because you pay off the car’s full price (not just depreciation as in PCP), monthly costs are higher than with some other finance types.

Risk of repossession
Missing repayments may lead to the lender taking back the vehicle, as it’s used as security for the loan.

Negative equity risk
If the car’s value drops faster than the loan balance, you could owe more than the car is worth — especially with a small deposit.

Early exit costs
Ending the agreement early through settlement or Voluntary Termination can be costly if you haven’t yet paid at least half of the total amount owed.

CS Finance vs PCP Finance

The main difference between Conditional Sale and Personal Contract Purchase (PCP) is what happens at the end of the agreement.

With Conditional Sale, you own the car automatically after making the final payment — there’s no balloon payment or extra fee. With PCP, you don’t automatically own the car; you must choose whether to pay the balloon amount to keep it, return the vehicle, or part-exchange it for another.

Is CS finance worth it?

If your priority is eventual ownership, you have a stable budget, and you anticipate keeping the car long-term, then a Conditional Sale can be worth it. But if you’re more focused on low monthly cost, flexibility, or you might want to sell/part-exchange after a short period, then CS may be less optimal.

When it can be worth it:

• If you want to own your car outright once the payments finish, CS gives that clear endpoint.
• If you prefer fixed monthly repayments and a simple structure: deposit + monthly payments + full ownership at end.
• If you drive a lot and want no mileage limits or condition return-penalties, CS often has fewer usage restrictions than leasing or PCP.
• If you want to spread the cost of a car but do not want to rent or lease it — you want full ownership eventually, rather than returning it. UK finance guides list CS as one way to spread cost.

When it might not be worth it:

• If your monthly budget is tight: CS payments tend to be higher because you’re financing the full vehicle cost, not just depreciation.
• If ownership isn’t your goal (for example you’d prefer to change the car every few years): a product like PCP may offer better flexibility.
• If you might struggle with repayments or life changes may impact you: CS is still finance under the lender’s ownership until the last payment, so missing payments brings risks like repossession.
• If the car will dramatically depreciate or you expect negative equity: you could end up owing more than the car’s worth until later in the term, and CS doesn’t necessarily protect you from that.