How to Write a Used Vehicle Payment Agreement

Used Car

The purchase of a used vehicle should always be accompanied by written terms of purchase. A used vehicle payment agreement, otherwise known as a bill of sale or a purchase agreement, must be carefully prepared to ensure that the seller is promptly paid and that the buyer receives the benefit of his bargain. A well-written agreement will deal with several issues in addition to payment terms such as warranties, title transfer and dispute resolution.

Instructions

1. Identify the buyer, the seller and the vehicle in the first paragraph of the agreement. If the seller is a dealer, the dealer should use his legal business name on the agreement. The agreement should identify the vehicle by make, model, year, color, Vehicle Identification Number and odometer reading (some of these details may be inapplicable in the case of vehicles such as boats and planes).

2. Draft a statement in which the seller guarantees that she is the legal owner of the vehicle. This protects the buyer from liability in case a third party later disputes the title.

3. Add a section describing any warranties offered by the seller. Although many sellers refuse to offer any warranties of quality, the seller should guarantee that no licensing fees or fines have been levied against the vehicle. If no warranties of quality are offered, the agreement should state this clearly, printed in all capital letters, to protect the seller from liability. The seller might also list any known defects in this section.

4. Compose a section that compels the seller to cooperate in transferring title to the vehicle by a specified date. Until title to the vehicle is transferred, the buyer will not enjoy full legal ownership.

5. State the payment details--the full price of the vehicle plus any taxes and transfer fees, payment terms (lump sum or installment payments), and payment method (by cash, check or bank transfer, for example).

6. Insert a dispute resolution clause. Although many people prefer to submit disputes to arbitration because it is often quicker and easier than litigation, small claims court might be the best option if the price of the vehicle is no higher than the small claims jurisdictional ceiling.

Tips & Warnings

• If the buyer is relying on third-party financing, be sure to include a clause that allows the buyer to cancel the sale if financing is not secured by a specified date.

• Be careful not to set up an installment payment plan with a term longer than the probable useful life of the vehicle--otherwise, you could end up making payments on a vehicle that is no longer operable.

References

• Car Contracts: Auto Bill of Sale

Resources

• Free Legal Documents: Car Sales Agreement (Sample)