What Is a Car Sale Contract?

A car sale contract is a legal document that serves as an agreement between the customer and the dealership (or, in the case of a used car, the private owner) and it clearly explains the details of the sale of the said vehicle from the seller to the buyer. Through this contract, the dealership or the private owner of the vehicle can then clearly describe the terms and conditions of the sale, as well as the condition of the vehicle that is being sold. Aside from the sale of a conventional four-wheeled vehicle such as a sedan, a car sale contract can also be used in the sale of a heavy vehicle such as a truck. This contract should also contain any basic logistics of the sale, such as the price and the delivery date.

Important Elements of a Car Sale Contract

A car sales contract, or a sales contract for that matter, consists of many different types of elements. Here are some that you need to pay attention to:

Buyer details. This is one of the important elements of the car sale contract. This contains important information about the buyer of the vehicle and is also reflected in their driver’s license. The buyer information usually includes the buyer’s full name, the buyer’s address, date of birth, and contact details. The buyer’s license number may also be listed in this section.Pricing and Sales details. Another element of a car sale contract, this section details the vehicle’s total price. This is further broken down into the car’s sales price, the cost of any other additional trim/variant of the car, any other fees that may be included in the transaction such as the documentation fees, the registration fees, the dealership fees, advertising fees, etc., and the overall sales tax amount of the transaction.Financing details. This element of the car sales contract lists down all of the necessary financing details. However, this part will only come into play should the buyer decide to exercise the financing option of the deal. The financing details of the car sales contract typically includes the total price of the car with the taxes and fees included, the amount of the down payment given by the buyer, the value of the trade-in, the total amount that is to be paid through financing, the interest rate of the loan, the payment period’s length or term, and the amount of the monthly payment to be made.Warranties. This element of the car sale contract states that any promises made throughout the vehicle selling process should be mentioned in the car sale contract. Variation in the vehicle sold from dealership to dealership or owner to owner implies that there is no “standard warranty” knowledge that can be assumed on either end. To appropriately set expectations for the future, it is critical that the vendor be explicit about the warranties included if any.

Mistakes When Writing Car Sale Contracts

Drafting car sale contracts is not an easy job, and sometimes mistakes can be made, which is natural. Here are the mistakes you need to be aware of:

Incorrect Information. This is one of the most basic errors that can be committed when writing the contract. Ensure that your name, billing address, important ID numbers, and contact numbers are all accurate when writing your information in the car sale contract.Hidden Charges. When you buy a car from a dealership or a private owner, you may be exposed to undeclared charges that are notoriously difficult to spot. For years, sellers have resorted to using hidden fees. To combat this error, make certain to inquire about all of the expenses specified in the contract. If you discover a cost that you do not agree with or an item or add-on that you did not request, you may always request that it be withdrawn. Never sign a sales contract that contains hidden costs. If a dealer refuses to budge on them, you may be able to locate another that does not.Charges for Free Items. A shady practice in itself, a dealer will frequently offer complimentary add-ons and extras for your new car. However, when it comes time to draft the contract, you may discover that these free add-ons are no longer free like you’d expect them to be. To make sure that the dealers follow through on their offers, these goods must be included in the contract and identified as costing $0 in order to be included.Interest Rate. When you have an error in writing the interest rate of the purchase (if the car purchase is done through financing) it must be rectified since your interest rate has a significant impact on your total financing costs, so ensure that the rate on the contract is precisely what was agreed upon. Additionally, make sure you thoroughly investigate loan conditions, as more and more drivers are losing out because they do not know all of the intricacies.Down Payment. Along with the interest rate, the down payment you’ve made during the purchase of the car must also be accurately reflected in writing the car sale contract in order to ensure that you’re only paying what you owe for the rest of the financing term.

Dealership Problems During a Vehicle Sale

Car dealerships also face problems whenever they try to sell vehicles to prospective customers. Here are some of the problems that they face:

Steps in Writing a Car Sales Contract

To protect yourself from dodgy dealerships, private owners, and any inconsistencies or disputes that may arise from transactions, a car sales contract is needed. With that being said, here are the steps you can follow when you make one:

  • 1. Write Down the Basic Information

    This is the first step in writing down the car sales contract. The information that should be included here is the name of the private seller or dealership, the name of the buyer as it appears on their driver’s license, and the contact details of each party. Along with those details, it also pays to include the reason why such a sale is even taking place.

  • 2. State the Conditions of the Sale

    After writing down the basic information and the reason for the sale, now it is time to state the necessary conditions of the ongoing car sale. In this stage, you must state that you are the owner of the car that is for sale, as well as the amount of cash that you have received. You must also remember to submit any kind of information regarding the vehicle that may affect ownership transfer, such as any liens and encumbrances.

  • 3. State the Complete Details of the Vehicle

    After stating the conditions of the sale in the previous step, now is the time to provide every important detail of the vehicle that is involved in the sale. Your car sale contract must include comprehensive and accurate information on the vehicle being sold. You must be extremely explicit, and if applicable, specify the trim line. If you possess two cars of the same make and model, you must specify which one is covered by the contract. Additional details of the vehicle that you need to state here include the year, the make and model, the body type, the vehicle identification numbers, the colors, and most importantly, the odometer reading if it involves a used vehicle.

  • 4. Indicate the Vehicle’s Condition

    After indicating the complete details of the vehicle to be sold, it is also important to do this step, which is to indicate the overall condition of the vehicle that is to be sold. Sometimes, the sellers typically state in the car sales contract that they are selling the automobile in an “as is” condition, which indicates the seller will not modify the vehicle’s condition or provide a guarantee on it. Whatever the condition of the vehicle is during the time of the sale will remain so until the new owner decides to do something about it.

  • 5. Verify the Accuracy of the Information

    After writing everything down in the car sale contract, proceed to this step. This is an important one and should not be skipped because any erroneous or unclear information that may be present or that is provided in the car sale contract is going to render the deal null and void. As an example, if the mileage stated in the contract is different from the actual mileage reading of the car, then that is enough grounds for the sale to be called off. Make certain that all parties involved completely comprehend the contract’s ramifications and that not a single party is intentionally or unintentionally misrepresenting the vehicle or the amount of money that is involved in the transaction.

  • 6. Sign the Contract and Make a Copy

    This is the last step of making the contract. In this step, once you’ve verified that all the information that is written down is true and accurate, then the parties involved in the car sale can proceed to sign the contract and date the contract with the date of the final transaction. When signing the car sale contract, it is also good practice to do this in front of a notary. Notaries provide concrete evidence of the authenticity of all the parties involved. After signing the car sale contract, it also pays to keep a copy of it for safekeeping purposes. If any dispute arises, you can then refer to the copy of the car sale contract that you have.


How do I know if it’s time to sell my car?

The answer to that is it really depends. For one, the age of the car, the mileage, and its condition may be a driving factor if you need to sell your beloved vehicle. If safety is your priority, and you don’t like driving a rolling hazard on the highway on the daily, and the repair bills prove to be too great than what you can actually handle, then, by all means, you have to let your vehicle go. There’s a lot at stake whenever you go out on the highway, even when you’re driving a new vehicle.

What is a car trade-in?

A car trade-in is essentially selling your used car to the dealer, and the amount that they pay for it gets taken off to the value of the next vehicle that you would like to purchase. This can be advantageous as it enables all the parties to complete the entire transaction in one place. But sometimes, this can be disadvantageous too as you may find that selling your vehicle to a third party will bring more value.

What classifies a vehicle as “used”?

A vehicle is already classified as “used” if it has already been driven more than what is usually necessary for moving a vehicle or road testing it prior to its sale to a new owner. This essentially means that company cars and demo units are under this classification. However, if the title of the vehicle indicates that it is for scraps, then it does not fall under this classification.

Whether you’re purchasing a new or used vehicle, it surely serves as a highlight of your commuting life. More importantly, having an effectively written car sale contract helps and protects the parties involved in the transaction should any dispute arise from it after the sale has been done. In this article, there are examples you can acquire regarding these types of sales contracts and you can use them as a reference when making one.