Legal Question in Credit and Debt Law in Pennsylvania

This is actually a complicated issue. The answer may have nothing to do with law. Do you still want him as a friend? Since you took the tools back, you could pay him the money back if you still want to keep him as a friend.

I assume that you did not have a written agreement that provided for a reasonable rate of interest on the balance of the purchase price. I also assume that you did not incur any added expenses - like to advertise the tools for sale after you took them back. To the extent that you may have incurred extra costs since he did not pay or were out the interest on the balance of the purchase price for 8 months, an argument could be made to allow you to keep some or all of the deposit, depending on how much was put down.

If you did not incur any extra costs and there was no agreement and interest owed for the 8 months, then I would give him his money back. Consider it a lesson learned that next time you sell something you will do a proper bill of sale (there are plenty of free examples on the internet), you will provide for interest if there is to be installment payments, collection costs/attorneys fees if payment is not made and you will indicate what will happen if payment is not made (like repossession of the item sold and forfeit of any deposit as liquidated damages).