Can a car dealer keep a deposit if the receipt doesn’t state that it is not refundable?

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Can a car dealer keep a deposit if the receipt doesn’t state that it is not refundable?

My friend went to a car dealer that he put a deposit down and then when he talked it over with us he decided he should get a more reliable car than this one so he went back the next day to get his deposit and the dealer said its non-refundable. His receipt doesnt state this nor does anything else state that deposits are non-refundable (he hasn’t even filled out an application). We did contact the attorney general but he said there was nothing he can do so his my friend screwed or what?

Asked on April 21, 2011 under General Practice, Iowa

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Unfortunately, the law is one the dealer's side. Contrary to what is implied in the question, the general rule is that deposits are  NOT refundable unless it is stated that they are. After all, the purpose of a deposit is to get the dealer to reserve or hold the car for a prospectice customer by giving the dealer assurance of getting paid something--the deposit--if the customer walks on the deal. A deposit that the customer could receive back at will would count for nothing--it would not *be* a deposit.

If the dealer had canceled the deal, that would be different--then they would have to return the money. But when the customer cancels the deal, he or she forfeits the deposit.


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