We get a lot of questions on our forum and in the comments sections of our articles from car buyers who have given a car dealer a deposit for a car and now – for whatever reason – want it back.
Quite often, buyers will be told that a deposit is refundable if they change their mind, only to subsequently change their minds and be told they can’t have their deposit back after all.
Usually there is no legal right for you to change your mind after buying a car from a dealer. There are no grounds to terminate the contract on medical grounds, compassionate grounds, loss of job or anything else. Once you hand over your cash, it’s gone. Trying to get your deposit back again involves negotiating the agreement of the dealer to refund your money, and is usually entirely up to them to decide to do so or not.
It should be noted that there are legal arguments about how much deposit a dealer is entitled to keep based on their reasonable costs and losses of income from a cancelled order. However, if it gets to the point where you are taking the dealer to court to argue about getting some or all of your deposit back, you are probably spending much more than whatever the deposit was anyway.
So what are the rules regarding deposits and when should you be able to have your deposit refunded?
When is a deposit not really a deposit?
The first problem is the word itself. Most people think of a deposit as a refundable bond or temporary holding payment, but in car sales that isn’t generally true. When you give a car dealer a deposit, it is almost always considered an up-front or initial payment on a car. As a rule, it is not refundable unless specific circumstances apply.
When buying a car from a dealership, the dealer will want two things: a signed contract and/or a deposit. Having both is better, but one or the other will do if necessary to consider a car sold. If you sign an order form or give a car dealer a deposit on a vehicle, you are buying that car. The deposit is a form of security to hold the car until you are ready to pay the rest of the money and collect the vehicle. If you change your mind, you lose the deposit. Simple enough in most cases.
This is entirely fair enough. Car dealers exist to sell cars. If you walk in and say “I want to buy this car right here”, but you are not prepared to sign an order form and are not prepared to put down a deposit, then you’re not serious about buying the car.
A dealer is not going to hold that car for you without some kind of guarantee that you are actually going to come back with the rest of the money. A signed order is nice, but if you try to back out of it then there’s not a lot they can do unless they want to take you to court. So they take a deposit – the amount may vary, but it has to be significant enough that you won’t simply vanish if you change your mind. You will want that money back and they will be able to either fight you for it or use it as an opportunity to keep you from cancelling your order.
Taking a deposit is also a tactical ploy from the salesperson. Once you have pulled out your wallet, you are making a psychological commitment to buying that car and you are less likely to change your mind or keep looking around for a better deal.
If a dealer tells you that a deposit is fully refundable if you change your mind, do not believe them unless they are prepared to put that in writing. This means getting them to email you to spell out the conditions for refunding your deposit, and/or noting on your receipt (always get a receipt) to say that the money paid is refundable if you choose not to continue with the purchase.
Most dealers will not be prepared to put the above in writing. Why not? Because deposits are not usually refundable unless it is the dealer who is cancelling the order.
Always remember that a verbal promise from a car dealer is worth nothing. If someone promises you something, get it in writing in an official document (email is fine, as it will show sender, email address and date) or else the promise does not really exist.
So when is a deposit refundable?
Generally, there is no cooling-off period when you buy a car from a dealership. If you visit the dealer and buy a car that you have seen at the dealership, even if the actual sale takes place off-premises, then you have bought that car and there is no legal basis to cancel your order and get your deposit back.
However, if the entirety of the sale takes place off-premises (so you are buying a car without ever visiting the dealership), then you have 14 days to change your mind – even after paying for the car and taking delivery. In this case, you are entitled to a full refund of any monies paid (some conditions do apply, though).
If the dealer cancels the order for whatever reason, such as the car no longer being available (it happens a lot, particularly in large multi-site operations), then you are entitled to your money back.
If the contract is voided for any reason, such as the factory not being able to supply the vehicle (production may have ended or halted, or the specification may have changed), then you are entitled to have your deposit back and are not obliged to take another vehicle.
If your finance application is declined, most dealers will refund your deposit without question. Technically, they could hold you to the contract and oblige you to find funding elsewhere, but in reality this doesn’t happen and you can get your money back.
Never give a car dealer money unless you are 100% comfortable with buying the car
This is one of The Car Expert’s Ten Golden Rules of buying a car. Only hand over your cash or credit card once you are completely comfortable with buying that exact car for that exact amount of money (whether cash or finance). If you’re still hoping to get a better deal, or you’re not sure about your job circumstances, or you’re not fully convinced about the colour, or you haven’t discussed it with your significant other or accountant, or any other reason at all, then don’t put a deposit down on the car. It is always much more hassle to get your money back again than it is to not spend it in the first place.