Buying or selling a vehicle through a private transaction is widely regarded as more economical than going through a dealership. While this rings true for many vehicle owners, such ownership exchanges require that the buyer and seller make a formal record called a Vehicle Purchase Agreement. This document serves as proof of the sale and can be used in legal matters. As such, it is crucial to understand what it is and how you can prepare one.
What Is a Vehicle Purchase Agreement?
A vehicle purchase agreement is a formal document that records the term of the purchase and sale of a vehicle. It is a general term that encompasses all the contracts that could be involved in the exchange of ownership of a car, including a bill of sale. When signed, a vehicle purchase agreement becomes a legally binding contract between the buyer and seller.
Essential Elements of a Vehicle Purchase Agreement
States will usually have guidelines on the information that should be included in a vehicle purchase agreement. The basic document will contain the following elements:
Buyer and Seller Information
- Full legal names
- Complete and current mailing addresses
- Social Security Numbers
Pricing and Sale Details
- The vehicle’s purchase price
- The agreed-upon payment method
- The individual prices of all added options
- Sales tax amount
- Other fees including advertising, documentation, dealership, and registration fees
- The down-payment amount and subsequent installments
- The amount being financed
- Financing details, including payment period and interest rate
Vehicle Purchase Agreement Templates and Examples
Before Signing the Car Purchase Agreement
As mentioned, a signed vehicle purchase agreement is a binding contract between the buyer and seller. This means that you should carefully review the document before signing it. Here is a checklist to help you prepare for signing:
- Confirm that your personal information (name, mailing address, Social Security Number) is recorded accurately on the contract.
- If the seller is offering added options, check that they are all listed in the agreement and remove those that you didn’t request.
- Review the total fees indicated in the agreement and ask the seller about those items you think should not be included.
- Check that the seller is not charging you for free items or services.
- Confirm that the seller has included the incentives they offered you during negotiations.
- Check that the entered purchase price is the actual amount you offered the seller.
How to Write a Vehicle Purchase Agreement
While it is often more prudent and convenient to sell your used car to a private buyer than the dealership, it does mean that you will have to draft your own Vehicle Purchase Agreement. Here is a step-by-step guide to help you do this:
Step 1: Start by supplying the buyer and seller’s full legal names and current mailing addresses, as recorded in their government-issued IDs.
Step 2: Next, describe the vehicle being sold in as much detail as possible, including by color, make, model, year, Vehicle Identification Number (VIN), and odometer reading.
Note: Always supply truthful and accurate information to the best of your knowledge, as false data could void the purchase contract.
Step 3: Indicate the purchase price – including whether it covers taxes – and date of sale as agreed upon by both parties. It is also advisable to describe the method of payment involved in the purchase.
Step 4: Explain how the vehicle will be delivered to the buyer upon receipt of payment. Will it be shipped, picked up by the buyer, or delivered by the seller? If there are any shipping costs involved in the delivery, mention them, and the party is liable to pay.
Step 5: Now, define the condition of sale as either ‘as is’ or with warranty. Most sellers in private transactions use the former option to limit their liability in the event a problem arises.
Step 6: Mention the documents that will be exchanged during the sale, such as the title. Specify if the title is clear or free of liens, loans, or legal liability – it should be. If the vehicle carries a finance plan, ask for a payoff letter indicating the amount you still owe.
Step 7: Have both parties go through the agreement and, if everything is in order, sign and date it. Make copies and leave every party with one.
Step 8: For extra verification, consider having a witness and notary sign the agreement too.
Frequently Asked Questions
Is a car purchase agreement legally binding?
If signed by both the buyer and seller, yes. Vehicle purchase agreements in the US are subject to state and federals laws that dictate contract principles such as formation. When this document is prepared per the applicable laws and signed by two parties, it becomes legally binding. Either party has legal recourse if the other person violates the terms in the agreement.
Is a vehicle purchase agreement the same as a bill of sale?
No, but they go hand in hand. A vehicle purchase agreement is a contract between a buyer and seller for the exchange of ownership of a vehicle. It defines the terms of sale such as price, condition, and title status. On the other hand, a bill of sale is a document prepared after a sale closes to confirm the exchange of ownership of an item. Think of it as a receipt.
How can I get out of a car purchase agreement?
Generally, it is very challenging to back out of a car purchase agreement once you sign it. If the terms and conditions of the contract don’t imply an ability to cancel it, the seller has discretion over whether to accept your withdrawal. You might be able to terminate a contract – nonetheless – if the seller was fraudulent or withheld information.
Who signs the purchase and sale agreement first?
Once the buyer and seller agree to the terms in a purchase and sale agreement, the buyer signs the document first, followed by the seller.
Preparing a vehicle purchase agreement is standard practice for buyers and sellers in a private transaction. These two parties exchange information such as the vehicle description (make, model, year, color, etc.), purchase price, payment method, and title status so as to facilitate a legal transfer. Remember, this document – once signed – is a legally binding document, so read through it carefully before affixing your signature.