I put a deposit on a car and then lost my job — I’ve returned it, but the dealer won’t refund my deposit. Is that legal?

If you’ve driven tires at a dealership lately, you know that inflation and tariffs are increasing the cost of new and used vehicles and the size of car loans.

Experian reported that the average loan for a new car at the beginning of 2025 was $41,720 with 6.73% interest, adding up to $745 a month in payments over five years. (1)

Meanwhile, the average loan for a used car was $26,144 with 11.87% interest, which works out to $521 a month in payments over five years.

Whether you pay more or less than that, there’s no doubt that buying a car is a big financial commitment.

But what if you change your mind at the last minute? Is it also a legal commitment?

Imagine Kendra, who makes a down payment on a car after budgeting for loan payments, signs the purchase agreement with dealership financing, and loses her job the next day.

He just wants to return the car, void the original agreement, and get his down payment back from the seller. The car is still in very good condition.

Here’s what someone in Kendra’s situation needs to know.

Unfortunately, if you’ve made a down payment on a car and signed a contract to buy it, there’s little you can do to undo the sale.

Edmunds.com warns car buyers that there is no waiting period when purchasing a car. The law says that once you sign a contract, you must fulfill your part of the contract.

Read more: US car insurance costs up 50% from 2020 to 2024 – this A simple 2-minute check can put hundreds back in your pocket

Exceptions may occur if there is a serious problem with the vehicle itself or if the salesperson lied about its features or operations; In this case, the dealer may cancel the contract. [2]

But losing your job isn’t reason enough for a seller to cancel the deal. Because a car starts to lose value from the moment the title is transferred to the buyer.

Undoing a deal also takes a lot of work.

The seller will need to cancel the car financing and complete the paperwork to get the title back and ensure the car maintains its new status so it doesn’t lose value. The seller will also need to refund your money for any exchanges. That’s a lot of work for a lost sale. [3]

The down payment is to protect the seller from doing a ton of work and then losing the sale to buyer’s remorse; just to get more work done.

Likewise, if you have received a vehicle loan from a bank or another financial institution and you own both the loan and the vehicle, you must make the payments. If you don’t, the lender may repossess the vehicle, which will cause major damage to your credit.

So it’s unlikely someone in Kendra’s situation will get their down payment back. But there is a compromise solution: voluntary repossession.

In this case, the buyer, who realizes that he cannot make the monthly payments, offers to surrender the vehicle voluntarily.

They won’t return the car to get their money back. They give it back because they can’t pay.

The dealer will sell the car to get back as much of the remainder of the loan as he can, and the original buyer will be responsible for paying the dealer the difference between what he owes on the loan and the price for which the dealer sold the car.

Unfortunately, cars are a major source of financial stress for many. If you lose your job, things get even worse.

To try to limit the possibility of future difficulties, a emergency fund To cover three to six months of living expenses, including car payments.

If you can, you can also buy a cheap used car, so you can afford the payments more easily in the long run.

That way, if you lose your job or experience some other temporary setback, you’ll be prepared to pay for your wheels.

We rely only on vetted sources and reliable third-party reports. For details, see editorial ethics and guidelines.

Experience (1); Edmunds (2); ENT (3)

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This article provides information only and should not be construed as advice. It is provided without any warranty.