What is an Installment Purchase Agreement and can my agency use installment purchase agreements to finance acquisitions?
An installment purchase agreement is a contract used to finance the acquisition of assets. Under the terms of such an agreement, the buyer pays the seller the full purchase price by making a series of partial payments over time. The payments include stated or imputed interest. The buyer takes title to the property at the inception of the agreement. The seller retains a security interest in the property until all of the specified payments have been made. The Constitution of the State of Arizona, Article 9, Section 5, currently prohibits State agencies from using installment purchase agreements to finance acquisitions. It is strongly recommended that any contracts employing periodic payments to finance the acquisition of assets be submitted to the Office of the Arizona Attorney General for review. For additional information on leases and assets, please see the State of Arizona Accounting Manual, Section II, G.