Finance glossary
Conditional Sale
Also known as: Conditional sale agreement
In simple terms
A conditional sale is buying something on credit where ownership only passes to you once you have paid every instalment. It is very similar to hire purchase and is often used for cars.
On this page
What does conditional sale mean?
A conditional sale is a credit agreement to buy goods where the sale is “conditional” on you completing all the payments. Until then the seller keeps legal ownership, even though you have use of the goods.
It is close to hire purchase, and is most often seen with cars and larger items. The main difference is that with a conditional sale you are committed to buying from the outset, rather than having a final option to purchase.
How a conditional sale works
You pay a deposit and then fixed instalments over the term. Ownership transfers automatically once the final payment is made — there is no separate option-to-purchase fee as there can be with hire purchase.
Because ownership stays with the seller until the end, the goods act as security. If you fall behind, the seller may be able to repossess them, subject to Consumer Credit Act protections.
How could this affect me?
A conditional sale lets you spread the cost of a purchase, but you cannot sell the goods until you own them outright, and defaulting risks repossession and a credit-file mark.
As with hire purchase, once you have paid a third of the total the goods usually become “protected”, so the seller generally needs a court order before repossessing.
Things to watch out for
- You do not legally own the goods until the last payment is made.
- You cannot sell the item while payments are still outstanding.
- Missing payments can lead to repossession of the goods.
- Unlike hire purchase, you are committed to buying from the start.
Know your rights
- Conditional sale agreements are regulated by the Consumer Credit Act 1974, with pre-contract information and usually a 14-day right to withdraw.
- Once a third of the total amount payable has been paid, protected goods generally cannot be repossessed without a court order.
- You can complain and escalate to the Financial Ombudsman Service if you are treated unfairly.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- legislation.gov.uk, Consumer Credit Act 1974 — conditional sale agreements (opens in a new tab). Accessed 22 Aug 2026.
- Citizens Advice, Hire purchase and conditional sale agreements (opens in a new tab). Accessed 22 Aug 2026.