Download our comprehensive Car Sales Contract template and protect your car purchase or sale with must-have clauses. We explain must-know facts, offer expert guidance, and list frequently asked questions.
Car Sales Contract Template for Private Sales
Updated 31 May 2024
Summary:
- Buying or selling a car is a significant transaction, and having a proper car sale contract is essential to protect both parties involved.
- Our guide explains the differences between a car sales contract and a vehicle sales agreement, the key elements of a car sales contract, the risks that a contract must cover, must-know facts, and frequently asked questions.
- We also offer a downloadable Car Sales Contract template for everyday use in New Zealand. You can also download it as a PDF.
Car Sales Contracts vs Vehicle Sales Agreements - Understanding the Differences
New Zealanders widely use both, but it's important to understand the difference so you use the correct document for your specific needs. We explain both documents in detail:
A Car Sales Contract is a legally binding document specifically focused on the sale of a car from one party to another. The main features of a Car Sales Contract include:
- Specificity to cars: This contract is designed solely for the sale of cars and may include details and clauses specific to cars, such as model, make, year of manufacture, VIN, and odometer reading.
- Detailed condition clause: Given that cars can have varied conditions, this contract often includes detailed descriptions of the car's condition at the time of sale, including any known defects or issues.
- Warranties and guarantees: The contract may include specific warranties or guarantees related to the car's performance, condition, or history, which can be critical in car sales.
- Transfer of ownership: The contract usually contains specific instructions and requirements for the transfer of car ownership, including details about the necessary paperwork and registration with NZTA.
A Vehicle Sales Agreement, on the other hand, is a broader term that can apply to any type of vehicle, including cars, motorcycles, trucks, boats, or any other type of vehicle. The main features of a Vehicle Sales Agreement include:
- Versatility: This agreement can be used for many vehicles, not just cars. It is designed to be flexible and adaptable to different types of vehicle sales.
- General clauses: While it includes all necessary legal clauses for the sale of a vehicle, it is usually more general than a Car Sales Contract. It may require additional customisation to fit the specific type of vehicle being sold.
- Inclusion of various vehicles: The agreement may include sections to specify the type of vehicle being sold, whether it's a car, motorcycle, boat, etc., along with relevant details for each type.
- Standard legal provisions: These include standard legal provisions required for any vehicle sale, such as seller and buyer information, payment terms, warranties, and transfer of ownership instructions.
Overall, a Car Sales Contract is specifically tailored for car transactions and includes detailed clauses specific to cars. In contrast, a Vehicle Sales Agreement is more versatile and can be used for any type of vehicle sale, which may require more customisation to address the specifics of the type of vehicle being sold.
Our view: If you're buying or selling a car, a Car Sales Contract will most likely be more precise and tailored to your needs.
Next Steps: Download our Car Sales Contract template for everyday use in New Zealand. You can also download it as a PDF.
Standard Key Elements of a Car Sales Contract
As outlined in our trusted template contract, essential elements include:
- Parties Involved
- Seller's Information: Full name, address, contact number.
- Buyer's Information: Full name, address, contact number.
- Vehicle Details
- Make and Model: Specifics of the car (e.g., Toyota Corolla).
- Year of Manufacture: Year the car was manufactured.
- Vehicle Identification Number (VIN): Unique identifier for the car.
- Registration Number: Current registration plate number.
- Odometer Reading: Current mileage of the car.
- Sale Price and Payment Terms
- Total Sale Price: Agreed amount for the car.
- Payment Method: How the payment will be made (e.g., bank transfer, cash).
- Deposit Details: Include the amount and terms if any deposit is required.
- Condition of the Vehicle
- Inspection: A clause stating that the buyer has inspected the vehicle and is satisfied with its condition.
- Warranties and Representations: Any guarantees the seller provides regarding the vehicle's condition.
- Transfer of Ownership
- Transfer Date: When the ownership will be officially transferred.
- Responsibilities: Details about who is responsible for the registration transfer and related fees.
- Signatures
- Spaces for both parties to sign and date the contract, indicating their agreement to the terms.
Next Steps: Download our Car Sales Contract template for everyday use in New Zealand. You can also download it as a PDF.
Car Sales Contract Checklist
A Car Sales Contract outlines the sale, but several must-do items must be completed around the time you sign the sales contract. These include:
- PPSR Check: Always perform a Personal Property Securities Register (PPSR) check before purchasing a vehicle to ensure it is free from security being registered on it by a lender.
- Proof of Ownership: Ensure the seller provides clear proof of ownership. This includes registration papers and any previous sale documents. Avoid signing any contract if the car has two owners and only one is signing.
- Transfer of Ownership: To avoid legal complications, the ownership transfer should be done immediately after the sale. This can be done online through the New Zealand Transport Agency (NZTA) website.
- Inspection Reports: It is advisable to have a third-party inspection report to assess the car's condition accurately before purchase. An AA Pre-Purchase Vehicle Inspection Report is a popular option.
- Warrant of Fitness (WOF): Make sure the vehicle has a current Warrant of Fitness, and make a note of when it expires.
- Insurance: Ensure you have proper insurance coverage from the moment you take possession of the car. This protects you in case of accidents or damages during the transition period.
- Lemon laws: Understand that there is no Consumer Guarantees Act for problematic cars if you buy from a private seller, as outlined in this government guide https://www.consumerprotection.govt.nz/help-product-service/cars/finding-the-right-car/buying-car-privately.
- Test Drive: Always take the car for a test drive before finalising the purchase to check for performance issues.
Understanding the Risks When Buying a Car Privately
While a car sales contract underpins the buying and selling a car between two people, buyers can be caught out if the seller isn't honest about important details. It happens all too often, and the costs and hassle for a buyer can be significant if they've bought the car. There are several risks you need to be aware of and take action to limit them:
- Fraudulent documents: Sellers may provide fake documents or withhold information about the car's history. Always verify documents and consider conducting a history check - CarJam (reviewed by MoneyHub) is one example of a trusted service.
- Outstanding finance: If the previous owner has taken out a loan against the car, it can be repossessed by the finance company. Our guide to PPSR checks explains what you need to know to avoid this.
- Undisclosed damage: The car might have undisclosed damage or be involved in past accidents. An independent inspection from services such as the AA can help uncover these issues.
- Ownership disputes: Delays in transferring ownership can lead to disputes. There have been situations where a seller will quickly take out a car loan after the sale and before the ownership transfers - we outline a case in May 2024 below. To prevent any issues, ensure the transfer process is completed immediately after the sale.
- Registration issues: Ensure all registration details are accurate and up-to-date to avoid fines and legal issues.
- Scams and fraud: Being conned is increasingly common throughout New Zealand, and many bad players use the promise of a car sale to enrich themselves. Be wary of cars for sale that seem too good to be true or sellers unwilling to meet in person. Always verify the seller's identity and ensure the transaction takes place in a safe location.
Case Study: Previous Owner Got Finance After Selling Their Car
As reported in a Reddit post in May 2024, a buyer found that the previous owner had taken out finance on the car after it was sold. The finance was registered on the PPSR after the purchase but before the ownership was transferred, causing complications for the new owner.
While such a situation is likely to be deliberately fraudulent, here's what you can do in such a situation:
- Document Everything: Keep all transaction records, including the car sales contract, proof of payment, and any correspondence with the seller.
- PPSR Check: Regularly check the PPSR to ensure no new security interests are registered against the car.
- Legal Action: If a loan is lodged against the car, contact the finance company with your proof of ownership and purchase date. They should then take the initiative and resolve the issue on their side.
- Tribunal: If you don't get anywhere, we suggest taking the matter to the Disputes Tribunal for resolution. Provide all relevant documentation to support your case.
Next Steps: Download our Car Sales Contract template for everyday use in New Zealand. You can also download it as a PDF.
Frequently Asked Questions
Why is a car sale contract necessary?
A car sale contract is crucial as it provides legal protection for both the buyer and the seller. It clearly outlines the terms of the sale and the condition of the vehicle at the time of purchase and helps prevent disputes by ensuring both parties are on the same page.
What should I do if the seller refuses to provide a contract?
Buying a car without a contract is a risk, and while it's not uncommon in New Zealand, the best approach is to insist on having a written agreement. If the seller refuses, it might be a red flag indicating potential issues with the sale, and they don't want to be held accountable later on.
In such cases, we suggest walking away from the deal if a contract isn't provided, as this could protect you from future problems.
Can I modify the template to suit my needs?
Yes, this is the best approach to ensuring a car sales contract that's fit for purpose. The downloadable template can be customised to include any additional terms or conditions that both parties agree upon. Personalising the contract ensures it fits your specific situation and car sale perfectly.
What is a PPSR check, and why is it important?
A Personal Property Securities Register (PPSR) check is essential before purchasing a vehicle. It ensures the car is free from lenders who have a security interest; the check protects you from inheriting any debt associated with the vehicle.
What should I verify during the car inspection?
During the inspection, check the car's overall condition, including the engine, transmission, brakes, and tyres. Look for any signs of damage or wear and tear. Getting a third-party inspection (such as an AA Pre-Purchase Vehicle Inspection Report) for an unbiased assessment is also a good idea.
How do I transfer ownership of the car I'm buying or selling?
Ownership transfer should be done immediately after the sale. This can be completed online through the New Zealand Transport Agency (NZTA) website. Ensure all necessary documents are filled out correctly to avoid any legal complications.
What happens if there is outstanding finance on the car?
If the car has outstanding finance, the finance company can repossess the vehicle. This is why performing a PPSR check is critical to ensure the car doesn't have a lender's financial security registered on it before completing the purchase.
What if the car has undisclosed damage or issues?
If undisclosed damage or issues are discovered after the sale, refer to the condition clause and any warranties in the contract. Such a situation highlights the importance of having a detailed inspection and a clear condition clause in your contract.
What steps should I take if I encounter ownership disputes?
While it's rare, it can happen. You'll need to ensure all documentation is in order, including proof of purchase, contract, and registration papers. If the issue cannot be solved, contact the NZTA and consider a dispute claim.
Can I return the car after purchase if I find a major issue?
It depends - in some cases if the car is significantly misrepresented, you might be able to lodge a claim in the Disputes Tribunal. However, buying a car from a private seller is very much a case of buyer beware and why you need to check everything upfront.
Next Steps: Download our Car Sales Contract template for everyday use in New Zealand. You can also download it as a PDF.