I am a serial entrepreneur and a consumer advocate. When I’m not helping car buyers, I love working on ventures that have a positive impact.
I run a cause marketing agency and serve on the board of Vayu Global Health where we are disrupting the medical industry and preventing the needless deaths of mothers and babies during childbirth.
A car deposit can save you money on monthly payments, but at the same time, they carry some amount of risk. There could be instances where the dealership won't refund the deposit.
Here's everything you need to know about car deposits.
Table of Contents
Some car dealers may request you put down a deposit, but you are not required to.
You can always decline to leave a deposit if you are not comfortable with it.
People are most likely to leave deposits in these cases:
You can make two types of deposits when buying a car: a holding deposit or a purchase deposit.
The holding deposit reserves the car for you, preventing the dealer from selling it to someone else. It's the most common deposit for used cars.
The holding deposit CAN go toward the purchase price, but this must be negotiated with the dealer. The holding deposit is only valid for a certain amount of time. Holding deposits can be either refundable or non-refundable.
A purchase deposit is often used when the dealer does not have the car you want in stock but has located it.
Most new cars bought from the factory require this, but some used car dealers will also ask for a purchase deposit when trading with or buying from another dealer.
Typically, the purchase deposit is non-refundable, but you may be able to negotiate otherwise with the seller. You should carefully review the contract with all of the terms and conditions of the sale.
Deposits can be refundable or non-refundable depending on the contract you sign.
If the deposit is refundable, you will get your money back if you choose not to purchase the car. However, even refundable deposits could have conditions. Ideally, you want a deposit that is unconditionally refundable and in writing.
Some dealers may only agree to a conditionally refundable deposit, so ensure that you fully understand and agree to the conditions. If you back out of the deal for any reason outside of the agreed-upon conditions, you will not get your money back.
Non-refundable deposits (sometimes marked as a deposit listed under "partial payment") will not allow you to get your money back if you change your mind. The only way to get your money back from a non-refundable deposit is if the dealership dishonored contractual/ legal obligations.
Regardless of which type of deposit you left, the dealership may refund it if:
Leaving a deposit carries a risk of a major loss, but sometimes it can be to your benefit to reserve the vehicle. For a deposit to be a good idea, you must be very certain you are ready to buy the car.
If you have a clear contract in hand for a refundable deposit and can negotiate the deposit down to a very low amount, it can be a good idea for cars on the dealer lot. It's worth noting that a down payment is different from a deposit.
If you do leave a deposit, make sure to protect yourself with these tips:
Unfortunately, some dealers will try to keep your money even if you meet the agreed-up conditions for a refund.
Here is a step-by-step guide of what to do if the dealer won't return your deposit:
The bottom line is that deposits can help you get the car you want, but they carry some risk. Ensure you know the terms of the deposit, have them in writing, and only consider a deposit if you are committed to buying the vehicle.
When it comes to car deposit refund rights, it comes down to the terms set in the contract. If you change your mind about purchasing a car and request a refund before signing any contracts, you are entitled to a full refund of your deposit. However, once you sign a purchase agreement or contract, the refund terms may vary.
To protect your rights, thoroughly read and understand the refund policy before making a car deposit. If you have concerns or encounter issues regarding your deposit refund, communicate directly with the dealership or seek legal advice if necessary.
The world of car deposits can seem like a maze, but it's all about knowing the shortcuts. Whether it's choosing between holding or purchase deposits, figuring out if your deposit is refundable, or ensuring you're covered in any scenario, the key is in the details.
Always get everything written out clearly, do a little detective work on your dealer, and think twice about how you pay.
We've got your back with the next steps. Dive deeper into the car buying journey with us—your go-to for making informed decisions.
