# Conditional Sales Agreement

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Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

Purchase agreement where title transfers at end of payments. Similar to an EFA.

## Content

Conditional sales agreement (CSA) is a financing structure where the seller (or lender) retains title to the equipment until the buyer completes all payments. The buyer has use and possession of the equipment from day one but does not legally own it until payoff.
How CSA compares to other structures
Equipment loanConditional sales agreement$1 buyout lease
Title at signingBuyer's nameSeller/lender's nameLessor's name
Title at payoffNo change (already buyer)Transfers to buyerTransfers to buyer for $1
Buyer depreciatesYesYes (treated as financed purchase)Yes
Lien mechanismUCC-1 or DMV lienTitle retentionUCC-1 or DMV lien
Tax treatmentEquipment purchaseEquipment purchaseFinance lease (purchase)

When CSA is used

Vendor financing: equipment dealers sometimes offer CSA for in-house financing. Simpler than coordinating with a third-party lender.
Owner-financed equipment sales: when a private-party seller carries the financing themselves.
Some specialty lender programs: particularly in heavy equipment and aircraft.

Why CSA can be problematic for buyers

Insurance complications: the legal owner is the seller; the buyer is the user. Insurance must name both correctly.
Tax/regulatory paperwork: who registers, who pays property tax (on titled equipment), who handles sales tax remittance. Depends on state.
Resale difficulties: if buyer wants to sell mid-term, the legal owner (seller) must consent and sign over title.
Bankruptcy treatment: in buyer's bankruptcy, the seller may have stronger position to reclaim equipment than a typical UCC-1 lender (this can be either good or bad for the seller depending on circumstances).

When CSA is fine
Most CSA arrangements work like a standard equipment loan from the buyer's perspective. The title-retention is mainly a backup remedy for the seller. Section 179 and bonus depreciation work identically.
The main practical difference: instead of a UCC-1 filing in public records, the title itself shows the seller. For UCC-1-perfected equipment, the lien shows up in business credit reports; for title-retained equipment, the lien is in the DMV/title record but not in business credit reports.