What to know before putting down a deposit for a used car
Find out how you can make a used car deposit to secure a dealership vehicle while you get financing.
Putting down a used car deposit can help you hold a vehicle with a dealership while you get financing. Just make sure that you don’t pay more than $1,000 as a starting point – and be prepared to ask for vehicle information and a receipt that shows proof of your deposit. This will ensure you don’t have any issues claiming your vehicle (or money back) when the time comes.
What is a used car deposit?
A used car deposit is a small chunk of money you put down to hold a vehicle while you get your finances in order. Leaving a deposit is not the same as signing a contract and is not legally binding in any way.
You may want to confirm with your seller that the deposit is refundable and have them write this on your receipt to avoid future confusion in the case that you decide not to purchase the car. It’s also essential to get the VIN on the vehicle so that you know what you’re committing to buy.
Types of deposits for used cars
There are two types of used car deposits that you may need to provide when buying a used car:
A holding deposit prevents the dealer from selling the car to another buyer and is the most common type of used car deposit.
- It may go toward the purchase price, but this needs to be decided between you and the seller.
- You’ll usually have a limited amount of time to come back and buy the car.
- The used car deposit can be either refundable or non-refundable — if you’re not 100% sure that you want the car, get it in writing that you’re leaving a refundable deposit.
A purchase deposit is most often used when the dealer doesn’t have the car you want in stock.
For new cars, a deposit is often required when buying a car from the factory. Used car dealers will sometimes require a purchase deposit when they’re trading or buying a car from another dealer.
- It’s usually non-refundable, but you should confirm this with the seller.
- Both you and the dealer should sign a contract that outlines all terms and conditions relating to the sale.
Do you need to leave a used car deposit?
Car dealers or sellers can request that you put down a used car deposit to hold the vehicle you’re interested in, but you’re not obligated to do so. The only time you may want to consider leaving a used car deposit is if you’re set on buying a particular vehicle and you just need to get the money side of things figured out.
You may also want to leave a deposit if you want a bit of time to secure a vehicle inspection or search for the vehicle’s collision history on a site such as CARFAX or CarProof. You shouldn’t leave a used car deposit for a car you’re not 100% sure you want unless your seller promises in writing that your deposit is refundable.
Should you leave a deposit for a car?
It doesn’t hurt to leave a used car deposit if you trust your dealer. That said, you may not want to leave a deposit in the following circumstances:
- The seller is asking for a used car deposit over $1,000
- You’re not sure that you want the vehicle
- The seller won’t provide written proof that the used car deposit is refundable
- The seller wants you to pay in cash
- You can’t verify the VIN for the vehicle
- You’re asked to leave a deposit on a used car of a private seller
How much of a deposit do you need to leave for a used car?
Most used car deposits in Canada range between $500 and $1,000. This doesn’t typically vary based on the price of the vehicle. When organizing a deposit, you should make sure that you get in writing that the deposit will be returned to you or applied to the purchase price of your vehicle when you buy your used car. As a rule of thumb, you should avoid paying a used car deposit over $1,000.
What to do if you leave a used car deposit
If you decide to leave a used car deposit to hold your vehicle, there are a few ways you can protect yourself:
- Agree on the terms of the deposit. Check whether the used car deposit is refundable, whether the deposit is part of the purchase price and how the deposit should be paid. Have all the terms written down and signed by both parties.
- Don’t use cash. Cash isn’t traceable and some less-reputable dealers may refuse to give your used car deposit back if there’s no paper trail. Using a credit card or debit card allows you to dispute the charge with your card provider if the dealer doesn’t want to refund the deposit.
- Get a receipt. It’s important to get a receipt for the used car deposit for your own records, especially if there is any disagreement down the line.
- Inspect the car thoroughly. Even if you’ve agreed that the used car deposit is refundable, make sure to inspect the car before you put down any money. Make note of the vehicle identification number (VIN) and, if possible, have the car inspected by a third-party mechanic.
- Get a VIN check. Run the vehicle’s VIN to find out if it’s been in an accident, was stolen or still has a lien from the previous owner. Don’t put a deposit on any car without a VIN — a reputable dealer will be able to get you the VIN number of any used car they’re selling, even if it’s not currently on the lot.
- Avoid leaving a large deposit. The average amount of money you can expect to leave for a used car deposit is between $500 and $1,000. Any more than that and you may be dealing with a fraudulent lender.
- Don’t leave a deposit on a used car of a private seller. Avoid leaving a deposit on a used car of a private seller unless you know the person well enough to trust that you’ll get it back.
How long will a dealer hold a car with a deposit?
The length of time your dealer will hold a car with a used car deposit may vary based on the type of deposit you leave:
- Holding deposit. A dealer will typically hold your vehicle for as long as they’ve agreed to do so. Usually, it should only take a few days for you to get your financing in order, so most will agree to hold your used car for a few days or weeks. That said, they may sell the vehicle to another buyer if you wait too long.
- Purchase deposit. Purchase deposits are a little bit different because they often depend on when a dealer gets a specific car in stock. This can sometimes take months or even years, depending on the vehicle. The seller will typically hold your deposit as long as it takes to get your vehicle in stock in this case.
Can I get my used car deposit back after I signed a contract?
Maybe, though it depends on the car dealer. While most provinces and territories allow for a “cooling off” period in which you can cancel a purchase and get a refund, unfortunately, this usually does not apply to vehicle purchases. This means that whether you can get your used car deposit back after signing a contract will depend on the dealer’s policy.
Found the car you want? Compare car loans to buy a used car
Be cautious any time you’re asked to leave a deposit on a used car and get everything in writing. And if you’re looking to finance a used vehicle, compare car loan providers to find one that might offer better rates and terms than the dealership.
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