What is a Used Car Purchase Agreement?

By definition, a used car purchase agreement is a legal document between the seller and the buyer that outlines the details of the terms of purchase of the used vehicle. This also serves as a sales agreement between the two parties. This document can be written as a simple, short agreement, or it can also be written as a detailed, legally binding contract, especially if you purchase a used vehicle from the dealerships and financing the deal instead of purchasing it outright. As you purchase the used vehicle, the private seller will usually ask you to sign a deed of sale (the simplest form of a used car purchase agreement). It serves as proof that the original owner that the car is no longer in their possession should it get involved in an unfortunate mishap, such as a crash or much worse, the car being abandoned.

What are the Contents of a Used Car Purchase Agreement?

A Used Car Purchase Agreement will usually share the same contents with a new one. Here are the most common terms and contents that you can find in a Used Car Purchase Agreement:

Definition of Terms: This section contains a clear and concise definition of the complex terms that are stated in the agreement/contract. This is done usually to avoid unnecessary confusion and to leave little to no room for interpretation of the complex terms used, should both parties have the misfortune of entering a dispute.Seller’s Information: This section comprises the details of the seller of the used vehicle, such as their name, ID number, contact details, and address. If the dealership is the one selling used vehicles, it contains the name of the said dealership, their contact details, and the address of their branch. Buyer’s Information: Along with the seller’s information, the agreement also contains the information of the buyer, which includes his/her name, ID number (preferably the buyer’s driver’s license number), contact details, and the home address of the buyer.Vehicle Information: This is usually one of the most important parts of the used car purchase agreement. This section comprises the details of the vehicle to be sold, such as its mileage reading at the time the transaction is done (unique to a used car purchase agreement), its license plate, the year it was manufactured, the vehicle make and model, the vehicle color, and its identifying numbers which are the engine and chassis numbers. Date of Sale: This section states the date and time that the purchase of the used vehicle was finalized.Main agreement: This is the main body of the agreement. It contains all the terms agreed by both parties of the sale, such as the conditions that are to be met, the price to be paid whether in full (usually in a private sale) or in finance (if buying a used car from a dealership). It also contains the necessary spaces to be filled up by both parties.Loan agreement: This section contains the terms of the loan agreement, should the buyer decide to purchase a used car from the dealership and choose to finance it. It contains details such as the annual percentage rate, the finance charge, the overall amount that is financed, and the total sale price. If you opted for a trade-in transaction, the value of the said vehicle that you traded is also stated here.Signature: When everything else in the document is agreed upon by both parties, this is the section where they will affix their respective signatures. The transaction is usually finalized when the agreement is signed.

How to Make a Used Car Purchase Agreement

Should you decide to write your own used car purchase agreement, here are the necessary steps that you should take or that you can use as a guide.

1. Identify the identities of the seller and the buyer.

This is usually written in the first part of the agreement and serves as the information sheet of the parties involved. The details of the buyer and the seller, such as their legal names, contact numbers, addresses, and ID numbers are among the things to be included in this part. This part of the agreement can also include the reason or reasons why the used vehicle is being sold.

2. Write the definition of terms.

The next step would be to write the definition of the complex terms that are going to be used in the main body of the agreement. It would be ideal to make them as clear and concise as possible to avoid confusion in the future, and it would also help if you can define as many terms as possible. You can also decide to skip this step entirely if you are totally confident that the deal would go on smoothly without future repercussions.

3. Write the details of the used car to be sold.

It pays to be specific when writing this section of the agreement. In this section, the main details of the vehicle are to be identified, such as its manufacturing year, the make and model, its color, its license plate, and its engine and chassis numbers. You should also include the vehicle trim, if applicable. The overall description of the vehicle’s condition at the time of sale can be also written here. The seller can usually indicate here that they are selling the used car in an “as-is” condition, meaning that no further repairs are to be made prior to finalizing the deal. Since this is a used vehicle, it is also important that the odometer reading at the time of sale is written here, and that it should completely match the reading on the odometer instrument.

4. Write the main terms of the agreement.

In this part of the agreement, the main terms and conditions of the used car sale should be stated. Afterwards, the paragraph stating that both parties are satisfied and agree to the terms written usually follows. If the agreement immediately starts in this part, it contains blanks or spaces to be filled with personal information by the buyer and the seller. This can also contain the date and time that the agreement is made.

5. Write the loan terms and conditions.

If the seller decides to finance the used car, the terms and conditions regarding the said loan should also be written, such as the total cost of the used car after financing, the amount of money paid as a down payment, the value of the vehicle traded-in (if this option is used), the interest rate, the term of the payment period, and the amount of money to be paid in the term’s duration.

6. Leave spaces for the signatures and verify the entire document.

As you near the completion of writing the used car purchase agreement, it is important that you should leave ample space for both the seller and the buyer’s signatures, and also some space for the stamps and dry seal if you decide to get the document notarized.

Things You Should Pay Special Attention in a Used Car Purchase Agreement

If you buy a used car from a dealership, you should take extra care when going through the terms written in the purchase agreement, as dealerships can be a bit sneaky sometimes. Here are a few things in particular that you should be aware of:

Extra fees: One can easily get caught out in this as they are going through the agreement, especially if they are enticed by the low prices that are shown upfront by the dealer. If you notice any extra or hidden fees, try negotiating with the dealer. If they wouldn’t budge, it doesn’t hurt to walk away.Charges for supposed to be free items: Double check that the free upgrade or add-on option offered to you by the dealership is actually stated as free in the agreement. If it shows otherwise, notify the seller about it so they can have it changed back to zero.Unrequested upgrades: This can also catch you by surprise. If you see this written in the agreement, notify the dealer immediately to have it changed. If they say that this is part of the agreement to recoup the cost for a low down payment, it is best to call the deal off.Down payment amount: Many dealerships offer enticingly low down payments upfront and stated in the sticker posted in the car. Do make sure that the amount listed is the same as the amount that you will actually pay.Interest rate: Since this plays an important part in the amount that you will pay throughout the whole loan term, make sure that the interest rate stated on the agreement is the same as the value that was offered by the dealer. You can request to have it changed by the dealer if the amounts do not match.


Is a Used Car Purchase Agreement a legally binding document?

Yes, that document now becomes legally binding as soon as both parties affix their signatures on it. So it is important that both parties go through the agreement and verify it multiple times before putting their respective signatures on it.

Can someone back out of the Used Car Purchase Agreement?

Unfortunately, dealerships cannot let you do this after the purchase agreement is signed. The surest way that you can attempt to back out of this is to take it into court. But usually, the court only considers it if there is a serious case of something fraudulent in the terms of the agreement.

I feel like I’m getting ripped off by the dealerships selling the used car. What should I do?

This is where you should pay extra care to the terms that you are reading. If you feel like there’s something that can be negotiated or totally removed when buying a used car, it is a wise option to bring it up to the dealer for it to get taken care of, and eventually get the contract amended. It is also wise to do your research on the dealership that you’re planning to visit in order to know how they do their respective business.

What is the difference between a bill of sale and a car purchase agreement?

A bill of sale is just basically a sales receipt, usually given when a private transaction is completed. A bill of sale is what’s used when you take the used car for re-registration and to have the original title transferred to your name. A purchase agreement is a more complex and detailed contract and it usually lists the terms and warranties of the used car being sold.

A Used Car Purchase Agreement is an important document since it provides proof of transaction of the sale and it also makes sure that it legally binds the buyer and the seller should any unforeseen issues surface later. Also completely understanding the terms and conditions written inside it is essential since you’ll be in a much better position to get the most out of your deal and also helps you avoid getting ripped off. If you’re having any trouble writing your own agreement, this article provides many examples above that you can choose from and use, or you can let it serve as your guide.