Car Deposit Refund Law in the UK

If you are looking to buy a car on finance, you will likely be required to put a deposit down. You should expect to part with 5%-10%, but in some cases, the amount is at your discretion based on your affordability.

A deposit is a good way to tell potential lenders that you have money to spare on your car, and reduces the amount you need to borrow, thus making it more likely you'll be able to make your repayments.

If you can put down a deposit before buying your car, you could significantly reduce your monthly repayments, making the purchase more affordable and cost-efficient.

Do you have a car on finance and would like to reduce your monthly repayments? Sign up with Car Credible today; we could help you save money on your deal.

However, there is often confusion about putting down a deposit and your legal rights as a consumer. For example, what happens if you pulled out of the deal; would you lose the money you've put down?

We assess the various options and clear up some grey areas to help you fully understand what it means to put a deposit down when buying a car and how to protect yourself to avoid losing your money.

What is a car deposit?

A deposit is used to secure a vehicle and make it known you intend to purchase. It also shows a lender that you are willing and able to make monthly repayments.

Once a deposit has been placed on a specific vehicle, the dealer will generally prevent other viewings or test drives so it's known that it is under offer and will soon belong to you.

A deposit is beneficial to both you and the dealer. It means that you have secured the car that you want to buy, and nobody else has the option to buy it, and it means that the dealer is about to make a sale.

In most cases, it's difficult to get your deposit back on a car purchase. The reason is that a deposit shows your intent to buy, meaning all the admin can be done, and contracts get drawn up. 

If it were simple to get a deposit back after laying one down to secure a vehicle, more people would likely take advantage of that, causing dealers and lenders to waste valuable time with the paperwork; it would not be a sustainable business model for them.

What happens if the buyer cancels the deal?

If you are buying a car and put a deposit down to secure it before backing out of the sale for whatever reason, there's a strong chance that you will be unable to get any deposit back.

If you change your mind, that's not the car dealer's problem. They've committed to all the work they've needed to do to help the sale complete, and therefore, they are unlikely to allow you to have your deposit back.

However, there are two instances where a buyer may have a few more rights when putting down a deposit on a car.

Buying the car online

Buying any product online, no matter how big or small, is subject to a cooling-off period, per the 2015 Consumer Rights Act. It means that if you buy a car online without seeing it in person, you would have 14 days to reject the order and get a full refund.

Car finance agreement

The other instance where you may have more rights is if you are planning to finance the car and something goes wrong. For example, the lender decides at the last minute that it doesn't want to loan you the amount for the vehicle.

As this is at the discretion of the lender - a third party in this instance - the dealer will provide a full refund to the customer. While it's not technically a legal requirement, it's typically common practice.

What happens if the dealer cancels the deal?

It's unlikely, but in some instances, it'll be the dealer that cancels the deal rather than the buyer. Reasons for this happening are if the manufacturer has stocking issues or needs to recall products, or if the car has been sold to another buyer.

In this situation, the buyer has no say in why they're not receiving the vehicle they have put a deposit down for, so the dealer will have no choice but to allow the buyer to get a full refund.

What happens if the car has a fault after purchase?

If you buy a vehicle, and it has a fault directly after purchase, you should receive your deposit back. That's because the car should be of satisfactory quality, per the 2015 Consumer Rights Act.

It will need to be proven that there were faults with the vehicle before the purchase was made because the buyer could have caused the fault, thus being liable for the issue and being undeserving of their refunded deposit.

If it can be proven, within 30 days of purchase, the deposit should get returned to the buyer. If the fault gets discovered between 30 days and six months of purchase, you may also be refunded if a replacement part or repair is unavailable.