What is Conditional Sales Contract?

A conditional sales contract is the legal agreement used when a customer finances a vehicle through the dealership. The buyer takes possession and use of the vehicle immediately, but the lender or dealer retains a security interest until the loan is fully repaid. If the customer defaults, the secured party can repossess the vehicle. The contract discloses the amount financed, interest rate, total cost of borrowing, payment schedule, and any add-on products. In Canada these contracts are governed by provincial consumer protection and cost-of-credit legislation, and the security interest is typically registered under provincial personal property security rules. Dealers must ensure every mandatory disclosure is accurate and that the customer understands the terms, since errors or omissions can make a contract challengeable and expose the dealership to complaints.