Vehicle Installment Sale Agreement

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Vehicle Installment Sale Agreement

A Brief Introduction About the Vehicle Installment Sale Agreement

When the buyer cannot make a one-time payment for the vehicle, they enter into an installment sale agreement. The other party to the agreement is the seller or dealer. The agreement will include all the details of the car like vehicle type, make and model of vehicle, the year of the vehicle, the color of vehicle, vehicle identification number, and engine number.

The responsibilities of both the buyer and the seller should be written clearly. The seller has to ensure that the title to the vehicle is clear; registration details are available, the reading of the odometer is correct, and provide any other details or paperwork relating to the vehicle.

A recreational vehicle rental agreement will have clauses relating to the sleeping capacity of the vehicle, cancellation policy, payment policy, rental insurance, cleaning, pet policy, generator policy, and disclaimer.

A commercial vehicle rental agreement if you need to rent a vehicle for commercial purposes. The terms of payment, insurance, maintenance, and repairs relating to the vehicle form part of the contract. The agreement has to state the purpose for which the vehicle is purchased. The payment schedule will include the number of installments, the amount of each installment, and when payments are due.

Who Takes the Vehicle Installment Sale Agreement?

If you are a buyer who cannot make an upfront payment towards the price of the vehicle or if you are the seller or dealer of vehicles and you want to provide an installment facility to customers for improving sales, then you would enter into this private car installment sale agreement

Purpose of the Vehicle Installment Sale Agreement

A motor vehicle retail sale installment agreement is a contract where the buyer needs the installment facility to purchase a vehicle as it is not possible to pay the full price in a lump sum payment, and the seller agrees to provide such a facility.

With this agreement, as a seller, you can improve revenues by making an expensive car affordable for the buyer through this arrangement because in a vehicle sales contract, with seller financing the entire operation upfront, a lot of funds get blocked. Your rights as a seller should be protected and this contract does just that. You can expect to get your installment payments on time.

As the buyer of the vehicle, this agreement ensures you don’t have to pay the full price and can use the vehicle provided you pay the installments. In the event of default, however, the seller will repossess the vehicle. You are guaranteed a clear title to the vehicle as well as possession of it before the due date.

Contents of the Vehicle Installment Sale Agreement

A standard vehicle installment sale agreement template can be used as a reference to determine the contents of the agreement. The following information can be found here:

  •   The names of the parties to the contract, the buyer and the seller
  •   The effective date of the agreement
  •   The purchase price and the payment schedule
  •   Itemization of the amount financed
  •   The physical damage insurance clause
  •   Credit life, accident and health disability insurance
  •   Buyer’s acknowledgment of contract receipt
  •   Governing laws according to which the contract is drafted
  •   Use and transfer of the motor vehicle
  •   Interest after maturity
  •   Events leading to the termination of the agreement

How to Draft the Vehicle Installment Sale Agreement?

While drafting the agreement, it would be helpful to refer to a vehicle rental agreement sample and making the necessary modifications. The points you need to consider are:

  • Eligibility for participation: The buyer and the seller should be over 18, of sound mind and not under coercion
  • Payment terms: The downpayment and the number of installments to be paid, including the due date. The late payment charges should also be mentioned
  • Contract terms: The contract should be fair to both the buyer and the seller. It should protect the rights of both parties to the contract
  • Dispute resolution clause: In the event of a dispute, the buyer and the seller should decide how the dispute will be resolved, the sharing of the attorney fees and the jurisdiction for the dispute
  • Termination clause: In case of premature termination
  • Signature of both parties

Negotiation Strategy

Both the parties to the agreement in a vehicle installment sale agreement should read all the clauses and negotiate the required clauses. The buyer should ensure that the price is fair, and the seller should ensure that the installments provide the required profit.

Benefits & Drawbacks of the Vehicle Installment Sale Agreement


  • Protection of interest: The interests of both the buyer and seller are protected. The buyer gets to use the vehicle if the installments are paid on time and the seller gets a steady stream of income
  • Higher sales: The seller is able to increase sales as this installment agreement makes the vehicle affordable for the buyer
  • Legal action: In case of non-performance, the injured party can take legal action


  • Loss of income: The buyer may default on the payment of the agreement causing losses to the seller
  • No legal action: The injured party cannot take any legal action in the absence of an agreement

What Happens in Case of Violation?

In case of a violation of this agreement, there are many remedies for both parties. The buyer or seller could opt for money damages, which would also include lost profits for a total breach.

In case of fraud, the contract would be canceled under rescission(1) or a new contract drawn up by court through the reformation. In the case of restitution, the injured party has to be restored to its original position. If the contract has reached an advanced stage, then money damages are not accepted, and the party has to fulfill the contractual obligation.

When entering into a vehicle installment sale agreement, both parties should ensure that their rights are protected. The payment schedule, including due dates, the governing law, the signatures of both parties, the dispute resolution clause, and the termination clause, should be incorporated.