Free Contract Purchase Agreement

Answer a few simple questions Print and download instantly It takes just 5 minutes

Create Your Free Contract Purchase Agreement

  1. Answer a few simple questions
  2. Email, download or print instantly
  3. Just takes 5 minutes

Contract Purchase Agreement

Additional Clauses


Additional Clauses



Frequently Asked Questions
When should I include an additional clause?You should include an additional clause if there are any terms or issues unique to your situation that have not been addressed in the questionnaire.How should I write my clause?In order to reduce confusion, write your clauses with plain language and limit them to one paragraph in length. Use any predefined terms such as Buyer or Seller in your clauses.


Your Contract Purchase Agreement

This document preview is formatted to fit your mobile device. The formatting will change when printed or viewed on a desktop computer.
Contract Purchase Agreement Page of
Initials: ______________________________ Page of

CONTRACT PURCHASE AGREEMENT

THIS CONTRACT PURCHASE AGREEMENT (this "Agreement") dated this ________ day of ________________, ________

BETWEEN:


________________________ of _____________________________________
(the "Buyer")

OF THE FIRST PART

- AND -


________________________ of _____________________________________
(the "Seller")

OF THE SECOND PART

(the Buyer and Seller are collectively the "Parties")

IN CONSIDERATION of the mutual covenants and promises in this Agreement and other valuable consideration, the sufficiency of which consideration the Parties hereby acknowledge, the Seller desires to sell the Vehicle described in this Agreement to the Buyer, and the Buyer desires to buy the Vehicle from the Seller on the following terms:

  1. Agreement Details
  2. The Seller desires to sell the Vehicle described as a new 2024 __________ __________ __________, with vehicle identification number __________ (the "Vehicle") to the Buyer, and the Buyer desires to buy the Vehicle from the Seller for personal, family or household use.
  3. The Seller owns the Vehicle that is the subject of this Agreement.
  4. Once the Buyer has paid the Seller all Monthly Payments, the Guaranteed Future Value of the Vehicle, and any fees, taxes, and expenses related to the purchase of the Vehicle, the Seller will transfer title to the Vehicle to the Buyer.
  5. Until the Buyer completes the purchase of the Vehicle, the Seller will lease the Vehicle to the Buyer according to the terms of this Agreement.
  6. Agreement Cost Disclosure
  7. The full retail value of the Vehicle as of this date is £1.
  8. The amount to be amortised over the term of the Agreement is £1.00.
  9. The guaranteed future value of the Vehicle is £_______ (the "Guaranteed Future Value").
  10. The Agreement interest rate is 4.5% per annum.
  11. The term of the Agreement is one month (the "Term").
  12. This Agreement includes unlimited miles. The Buyer will not be required to pay any fees for miles used.
  13. The Buyer will provide a down payment of £_______, which will be subtracted from the amount to be amortised over the Term.
  14. The total amount payable by the Buyer upon signing this Agreement is £1.00.
  15. The monthly payment under this Agreement is £1.00 (the "Monthly Payment"). Any VAT would be allocated over the Term of the Agreement and added to that Monthly Payment. The first payment will be due upon signing and the following payments will continue each month on the same day of the month as the Agreement is signed. If a Monthly Payment is due on the 29th, 30th, or 31st, then it is due on the last day of the month in a month that does not have a 29th, 30th, or 31st.
  16. Monthly Payments may be made by bank transfer, cheque, post-dated cheques, money order, bank draft or pre-authorised payment.
  17. At the conclusion of the Agreement, if all Monthly Payments are made, the total cost of the Agreement, excluding the Guaranteed Future Value, and any cost for repairing excess wear and tear to the Vehicle, will be £1.00.
  18. Except as expressly provided in this Agreement, no warranties, either express or implied, statutory or otherwise, as to any matter whatsoever, have been given by the Seller.
  19. Buyer Obligations
  20. The Buyer will assume all risk of loss and damage to the Vehicle. The Buyer is responsible for insuring the Vehicle based on its full retail value, with the following coverage:
    1. bodily injury and property damage coverage in the minimum amount of £1,000,000;
    2. comprehensive fire and theft insurance with a maximum excess of £250; and
    3. collision insurance with a maximum excess of £250.

    The Buyer will ensure that the Seller is named as registered owner, and as "Additional Insured" and loss payee in the insurance policy (the "Insurance Policy").

  21. The Buyer agrees to co-operate with the Seller and the insurance company in pursuing or defending any claim or action resulting from the use of the Vehicle. Any award or money the Buyer receives as a result of a claim or action is to be assigned to the Seller. If the Buyer fails to maintain insurance or if a claim is denied by the Buyer's insurance company for any reason, the Buyer remains responsible to pay the total cost of the Agreement.
  22. The Buyer agrees to indemnify the Seller from any loss, and in order to prevent such loss, the Buyer will do the following:
    1. keep the Vehicle free of encumbrances, such as fines and liens;
    2. indemnify the Seller from all claims and expenses resulting from the maintenance and use of the Vehicle; and
    3. pay all amounts owed under this Agreement without deducting any amounts the Buyer claims to be owed by the Seller.
  23. The Buyer is prohibited from using, transferring, or altering the Vehicle, as follows:
    1. the Vehicle is not to be used by drivers without an appropriate licence or those restricted under the Insurance Policy;
    2. the Vehicle is not to be used illegally, in a manner contrary to the Insurance Policy, or as a vehicle for hire or public transport;
    3. the Buyer will not transfer or assign this Agreement, or ownership of the Vehicle, to a third party, except with the Seller's prior written consent. The Buyer will also ensure that the Vehicle is not seised, confiscated, or involuntarily transferred, even if the Vehicle is the subject of judicial or administrative proceedings;
    4. the Buyer will not remove the Vehicle from the country in which this Agreement is signed without the Seller's prior written consent, with the exception of trips within continental Europe of less than 60 days; and
    5. the Buyer will not install accessories in the Vehicle, or alter the Vehicle in any way, without the Seller's prior written consent.
  24. During the Term of the Agreement, the Buyer will be responsible for paying all fees required for registration, licensing, testing, and any inspection of the Vehicle requested by a government or other authority. The initial cost of registration must be paid prior to removing the Vehicle from the Seller's possession.
  25. Inspections
  26. The Buyer acknowledges that the Vehicle has been inspected and the Buyer accepts the Vehicle as being in a good state of repair, not including manufacturer's defects which would not have been visible upon inspection.
  27. The Seller has the right to inspect the Vehicle, without prior notice, at all reasonable times during the Term of this Agreement.
  28. Event Of Default
  29. The Buyer will be in default under this Agreement if:
    1. the Buyer fails to make a Monthly Payment on the due date;
    2. a bankruptcy, receivership, or insolvency proceeding is initiated by the Buyer or against the Buyer;
    3. a creditor or a government authority seises the Vehicle;
    4. the Buyer has misrepresented personal or financial information;
    5. the Buyer is no longer living;
    6. the Vehicle is stolen or damaged beyond repair;
    7. the Buyer does not pay the Guaranteed Future Value and the Vehicle is not returned at the end of the Term; or
    8. the Buyer breaches any other term of this Agreement.
  30. In the event that the Buyer defaults under this Agreement, the Buyer will be required to pay the amounts applicable to the Vehicle during the remainder of the Term.
  31. If the Buyer defaults under this Agreement, the Seller will pursue the remedies outlined in this Agreement, in addition to any other remedies allowed by law. If the Buyer defaults, the Seller may terminate this Agreement, and may recover the Vehicle and sue the Buyer for damages.
  32. There may be a substantial charge if you end this Agreement early without purchasing the Vehicle. The charge may be up to several thousand pounds. The actual charge will depend on when the Agreement is terminated. The earlier you end the Agreement, the greater this charge is likely to be.
  33. Excessive Wear and Tear
  34. The Buyer is responsible for ensuring that the Vehicle is regularly maintained and is kept in good repair. Regular maintenance and repair includes, but is not limited to, the excessive wear and tear provisions below. The Buyer is to pay the costs of regular maintenance and any costs for repairs not covered by warranty.
  35. Excessive wear and tear will include, but is not limited to, the following, even if covered by the Buyer's Insurance Policy:
    1. cracked, damaged, or tinted glass;
    2. dented or damaged body panels, wings, lights, or paint;
    3. missing equipment or accessories that were provided with the Vehicle, including but not limited to wheel covers, jack, wheel wrench, and spare tyre or regular tyres;
    4. tyres with less than 3mm of tread remaining at the lowest point;
    5. damage to the interior of the Vehicle, including but not limited to dash, seats, floor covering, upholstery, truck liner, and center console (if applicable); or
    6. mechanical damage that affects the safe, proper, or lawful operation of the Vehicle, which would include damage that causes the Vehicle to fail a safety inspection in the country where this Agreement is signed.
  36. If the Vehicle has excess wear and tear, there will be a charge to the Buyer for the excess wear and tear.
  37. During the Term, damaged or lost parts, equipment, or accessories may be replaced with items of equal or better quality and construction, and replacement items that meet this standard will be accepted as original items, upon return of the Vehicle.
  38. Returning the Vehicle
  39. If the Buyer has already paid 50% of the Monthly Payments or more, the Buyer may return the Vehicle at any time by paying the following amounts:
    1. the cost of repairs needed as a result of excess wear and tear; and
    2. any outstanding amounts, other than Monthly Payments, under this Agreement.
  40. If the Buyer has not paid 50% of the Monthly Payments, the Buyer may return the Vehicle at any time by paying the following amounts:
    1. 50% of the total Monthly Payments minus the amount of Monthly Payments the Buyer has already paid;
    2. the cost of repairs needed as a result of excess wear and tear; and
    3. any other outstanding amounts under this Agreement.
  41. After the Buyer has returned the Vehicle and paid any required costs and fees, the Seller will return the following amounts, or the remaining portions of these amounts, to the Buyer:
    1. any money received from an insurance claim or action that is not used to repair or replace the Vehicle.
  42. Purchasing the Vehicle
  43. The Buyer may complete the purchase of the Vehicle at any time during the Agreement by paying the following amounts:
    1. the Monthly Payment multiplied by the number of months remaining in the Term;
    2. the Guaranteed Future Value of the Vehicle; and
    3. any fees, taxes, and expenses related to the purchase of the Vehicle.
  44. The Buyer may complete the purchase of the Vehicle at the end of the Term by paying the following amounts:
    1. the Guaranteed Future Value of the Vehicle; and
    2. any fees, taxes, and expenses related to the purchase of the Vehicle.
  45. After the Buyer has paid all of the costs and fees associated with purchasing the Vehicle, the Seller will return the following amounts, or the remaining portions of these amounts, to the Buyer:
    1. any money received from an insurance claim or action that is not used to repair or replace the Vehicle.
  46. General Provisions
  47. This Agreement may not be assigned to a third party without the Seller's prior written consent and approval.
  48. This Agreement will pass to the benefit of and be binding upon the Buyer's respective heirs, executors, administrators, successors and assigns.
  49. This Agreement may only be amended or modified by a written instrument executed by both Parties to this Agreement.
  50. All costs, expenses and expenditures including, and without limitation, the complete legal costs incurred by enforcing this Agreement as a result of any default by the Buyer, will be added to the amount then outstanding and will immediately be paid by the Buyer.
  51. The clauses and paragraphs contained in this Agreement are intended to be read and construed independently of each other. If any part of this Agreement is held to be invalid, this invalidity will not affect the operation of any other part of this Agreement.
  52. If there is a conflict between any provision of this Agreement and any form of agreement prescribed by applicable legislation of  (the "Act"), that prescribed form from the Act will prevail and such provisions of the Agreement will be amended or deleted as necessary in order to comply with that prescribed form. Further, any provisions that are required by the Act are incorporated into this Agreement.
  53. Headings are inserted for the convenience of the Parties to this Agreement only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine mean and include the feminine and vice versa.
  54. This Agreement constitutes the entire agreement between the Parties to this Agreement and there are no further items or provisions, either oral or otherwise.
  55. The Buyer is entitled to a complete copy of this Agreement. This Agreement should not be signed until all terms have been set out and the Buyer has read it entirely.
  56. This Agreement will be governed by the laws of .

IN WITNESS WHEREOF the Parties have executed this Agreement on this ________ day of ________________, ________.

 

_______________________________
______________________(Seller)

 

_______________________________
______________________(Buyer)



NOTICE TO THE BUYER:

(1)  This is a financing agreement. You do not own the motor vehicle previously described until you have paid the Seller all Monthly Payments, the Guaranteed Future Value of the Vehicle, and any fees, taxes, and expenses related to the purchase of the Vehicle;

(2)  Do not sign this Agreement before you read it or if it contains any blank spaces to be filled in;

(3)  You are entitled to a completely filled in copy of this Agreement when you sign it;

(4)  Warning -- unless a charge is included in this Agreement for public liability or property damage insurance, payment for that coverage is not provided by this Agreement.

I do hereby acknowledge receipt of a completed and signed copy of this Agreement. ________

Buyer Initials

I do hereby acknowledge receipt of a completed and signed copy of this Agreement. ________

Seller Initials


Itemisation of Gross Capitalised Cost

(A) Value of the Vehicle as equipped at the time of entering into the Agreement ...................................................................................................

 

£1

(B) Values and descriptions of accessories and optional equipment the Seller agrees to add to the Vehicle after entering into the Agreement .......

 


none

(C) Premium to be paid for each policy of insurance ................................

 

none

(D) Charge for each service contract ..........................................................

 

none

(E) Outstanding Agreement balance or prior credit balance  ....................

 

none

(F) Itemisation of any other good or service not included above ..............

 

none

     
   
 

(G) Total Gross Capitalised Cost .............................................................

 

£1.00



Monthly Payment Calculation

Gross capitalised cost. The agreed upon value of the Vehicle (£1) and any items the Buyer pays over the Term (such as service contracts, insurance, any outstanding prior credit or Agreement balance) ....................................................................................................

 

£1.00

Capitalised cost reduction. The amount of the trade in allowance and down payment made by the Buyer to reduce the gross capitalised cost ...................................................................................................................

-

£__________

Adjusted capitalised cost. The amount used in calculating the periodic payments ..................................................................................................
(This amount along with the additional early termination charges will be used in determining your early termination liability.)

=

£1.00

Guaranteed Future Value.  The value of the Vehicle at the end of the Agreement used in calculating the base Monthly Payments ....................

-

£__________

Depreciation and any amortised amounts.  The amount charged for the Vehicle's decline in value through normal use and other items paid over the Term ............................................................................................

=

£1.00

Interest charge.  The interest charged in addition to the depreciation and any amortised amounts .......................................................................

+

£0.00

Total of base monthly payments.  The depreciation and any amortised amounts plus the interest charge ..............................................................

=

£1.00

Agreement payments.  The number of payments in your Agreement ...

 

/ 1

Base monthly payment............................................................................

=

£1.00

Monthly VAT...........................................................................................

 

_____

Total Monthly Payment..........................................................................

=

£1.00

Last updated February 13, 2024

Written by


Reviewed by


|

Fact checked by



What is a Contract Purchase Agreement?

A Contract Purchase Agreement is used during vehicle sales where the buyer pays for the vehicle using monthly installments. The seller leases the vehicle to the buyer until the purchase is complete. Our template is ideal for situations not involving anyone in the business of selling or leasing vehicles (e.g., car dealerships).

Contract Purchase Agreements are also known as contract purchases.

How does a Contract Purchase Agreement work?

Over the term of a Contract Purchase Agreement, the buyer pays monthly installments and leases the vehicle from the owner. At the end of the term, the buyer can return the vehicle or complete the purchase by paying a final lump sum (i.e., a balloon payment). 

The leasing company bases the balloon payment amount on the vehicle's:

  • Estimated mileage at the end of the contract
  • Wear and tear
  • Make and model
  • Current mileage

Buyer obligations

The buyer has several obligations after signing a Contract Purchase Agreement including:

  • Insuring the vehicle and assuming all risks associated with the loss of and damage to the vehicle.
  • Paying all fees required for the vehicle’s registration (e.g., licensing, testing, and any government-issued inspections).
  • Keeping up to date on payments (e.g., down payments and regular monthly payments).
  • Not transferring ownership of the vehicle to another party without the seller’s written consent.
  • Not changing the vehicle or adding accessories to it without the seller’s permission.
  • Not taking the vehicle out of the country where the contract was signed without the seller’s consent, except for short trips within continental Europe for 60 days or less.
  • Following driving licence regulations while operating the vehicle.
  • Not using the vehicle for illegal purposes.

Inspecting the vehicle

By signing the Contract Purchase Agreement, the buyer confirms that they have inspected the vehicle and that they accept it to be in good condition. This excludes defects not visible during inspection (i.e., manufacturer defects).

The seller can also check the vehicle at any reasonable time without prior notice to make sure that it is being maintained as per the contract terms.

Event of default

Under LawDepot's Contract Purchase Agreement, the buyer will default on their payments if:

  • They fail to make a monthly payment on its due date.
  • The buyer claims bankruptcy, receivership, or insolvency, or if any of the previous actions are initiated against the buyer by themselves. 
  • The buyer fails to pay the guaranteed future value, and they haven’t returned the vehicle at the end of the agreement.
  • A bailiff or enforcement agent seizes the vehicle by the decree or order of a county court judgement (CCJ)
  • The buyer has provided false personal or financial information.
  • The vehicle is stolen or damaged beyond repair.
  • The buyer passes away.

If the buyer defaults on the vehicle payments, the seller can cancel the contract and reclaim the vehicle. The seller can also pursue legal action against the buyer, potentially filing a lawsuit.

Excessive wear and tear

The buyer is responsible for ensuring regular maintenance and proper upkeep of the vehicle, and they will be charged for any signs of excessive wear and tear that are not covered by a warranty. Damages of this extent include:

  • Missing equipment or accessories that came with the vehicle (e.g., wheel covers, jack, wheel wrench, and regular or spare tyres)
  • Damage to the vehicle’s interior (e.g., the dashboard, seats, floor covering, upholstery, truck liner, and centre console)
  • Mechanical damages that prevent the vehicle from functioning at the level of safety permitted by UK law (e.g., brakes, steering systems, and lights)
  • Dented or damaged body panels, wings, or paint
  • Cracked, damaged, or tinted glass

Purchasing the vehicle

The buyer may purchase the vehicle at any time during the contract or when the contract ends. If the buyer wants to purchase the vehicle before the contract ends, they must first pay:

  1. The monthly payment amount multiplied by the number of months left in the agreement
  2. The vehicle’s guaranteed future value at the end of the lease term, regardless of depreciation
  3. Any other fees, taxes, and expenses related to the vehicle

If the buyer wishes to purchase the vehicle after the contract ends, they must be able to pay the full guaranteed future value of the vehicle plus any other fees, taxes, and expenses related to the vehicle’s purchase.

Returning the vehicle

If the buyer has paid more than 50% of the monthly payments, they can return the vehicle whenever they want. They just need to cover repair costs for wear and tear and settle any remaining amounts, excluding monthly payments.

If the buyer hasn't paid at least half of the monthly payments, they can return the vehicle by paying half of the total monthly payments (excluding what they've already paid) and repair costs for wear and tear. This clears any remaining balances, except for monthly payments.

What is equity in a Contract Purchase Agreement?

Equity is the value of an item after liabilities and debts have been paid off. A Contract Purchase Agreement has two types of equity: positive and negative.

  • Positive equity is if the car’s value is higher than the final balance of the payments.
  • Negative equity is if the car’s value is less than the payments being made.

How long do Contract Purchase Agreements last?

LawDepot’sContract Purchase Agreement template bases the amount of time the contract lasts on your unique situation, so it differs for each person. However, Contract Purchase Agreements created through car dealerships and leasing agencies typically take 2 to 5 years to complete.

What information do I include in a Contract Purchase Agreement?

You must include the following details for a Contract Purchase Agreement to be valid in the United Kingdom:

  1. Buyer and seller details: State if the buyer or seller is an individual or a company, as well as their name and address.
  2. Vehicle details: Specify if the vehicle is new or used, along with its colour, make, model, and identification number
  3. Financing information: Provide the contract term length, full retail value, guaranteed future value, and security deposit information.
  4. Costs and fees: List the details for pre-authorized payments and penalty fees or other costs associated with late payments.
  5. Warranties: State the number of years left on the manufacturer’s warranty and whether an extended warranty for repairs will be provided.
  6. Insurance: Vehicle insurance is a legal requirement for drivers in the UK. 
  7. Additional clauses: Our template allows you to add extra terms to your Contract Purchase Agreement. 
  8. Signing details: Specify the contract’s signing date.

What is the difference between a Contract Purchase Agreement and a hire purchase agreement?

In a hire purchase agreement, you put down an initial deposit, usually 10 percent or higher, and then pay off the balance in monthly increments. Unlike in a Contract Purchase Agreement, the vehicle's residual value is not considered. Instead, hire purchase agreements focus on the car’s:

  • Retail price
  • Deposit size
  • Contract length

In a Contract Purchase Agreement the buyer is paying off the vehicle's depreciation value, not the entire value. Meanwhile, in a hire purchase agreement, the buyer is working towards paying off the entire value of the vehicle in order to purchase it at the end of the term.

Can I make changes to an existing Contract Purchase Agreement?

Yes, you can usually adapt or change the terms of a Contract Purchase Agreement. To do so, the buyer and the seller must agree to the changes. Both parties can sign a Contract Addendum to confirm that they have reached an agreement.

The amended contract must include both party's signatures and the changes' dates.

Can I cancel a Contract Purchase Agreement?

Yes, you can cancel a Contract Purchase Agreement. It may be beneficial to cancel a total finance agreement if:

  1. The car’s value outweighs the final balance (i.e., it has positive equity)
  2. You no longer need the car
  3. You can afford to downgrade your car or go without one completely   

You should potentially avoid cancelling a Contract Purchase Agreement if: 

  1. The car has negative equity, and you want to sell it
  2. You can't afford to pay at least 50 percent of the remaining balance in cash of the total finance payments (e.g., if the buyer has paid £10, 000 and the total finance payment is £30, 000, then the buyer will have to pay an additional £5, 000 to reach 50 percent)

You can cancel a Contract Purchase Agreement in two ways: voluntary termination or through a settlement (early repayment). 

Voluntary termination

You can cancel the agreement with voluntary termination and return the car if you have made at least half of the payments. 

Early repayment or settlement

Requesting a settlement is another option if you want to cancel the agreement and you have the funds to pay off the full remaining balance of the agreement. A settlement can be more cost-effective than monthly payments under a Contract Purchase Agreement as you will no longer have to pay interest.

Related documents

Thumbnail of sample of Contract Purchase Agreement document

Sample

Contract Purchase Agreement

Personalise your Contract Purchase Agreement.

Print or download in minutes.

Are you ready to create your Contract Purchase Agreement?
This document preview is formatted to fit your mobile device. The formatting will change when printed or viewed on a desktop computer.
Loading ...
Loading ...

Note: Your initial answers are saved automatically when you preview your document.
This screen can be used to save additional copies of your answers.