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 kicked the tires at a dealership lately, you’ll know that inflation and tariffs are driving up the cost of new and used vehicles — and the size of car loans.

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

Meanwhile, the average loan for a used car was $26,144 at 11.87% interest, adding up to $521/month in payments over five years.

Whether you pay more or less than that, there’s no question 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 made a down payment on a car after budgeting for the loan payments, signed the agreement to purchase with dealership financing and then lost her job the next day.

She just wants to return the car, nullify the original agreement and get her down payment back from the dealer. The car’s still in mint 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 unwind the sale.

Edmunds.com warns car buyers that there’s no cooling-off period when you purchase a car. The law says as soon as you’ve signed a contract, you have to fulfill your part of the agreement.

Read more: US car insurance costs have surged 50% from 2020 to 2024 — this simple 2-minute check could put hundreds back in your pocket

The exception might be if there is a serious problem with the car itself or the salesperson lied about its features or operations, in which case the dealer might cancel the agreement. [2]

But losing your job is not sufficient reason for a dealer to cancel the deal. That’s because a car starts to depreciate the moment title transfers to the car buyer.

It’s also a lot of work to unwind a deal.

The dealer would have to cancel the car financing and complete paperwork to get title back and ensure the car keeps its status as new so it doesn’t lose its value. The dealer would also have to refund your money from any trade-in. That’s a fair amount of work for a lost sale. [3]

The down payment is meant to protect the dealer from doing a ton of work and then losing the sale to buyer’s remorse — only to do more work.

Likewise, if you took out a car loan from a bank or other financial institution and have both the loan and the car, you must make the payments. If you don’t, the lender can repossess the vehicle, which will badly damage your credit.

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

In this situation, a buyer who realizes they can’t make the monthly payments voluntarily offers to surrender the vehicle.

They aren’t returning the car to get their money back. They’re giving it back because they can’t make the payments.

The dealer will sell the car to recover what they can of the remainder of the loan and the original buyer will be responsible for paying the dealer the difference between what they owe on the loan and what the dealership sold the car for.

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

To try to limit the possibility of future hardship, it’s a good idea to make sure to have an emergency fund to cover three to six months of living expenses, including car payments.

You could also buy a cheap used car if you can, so you can more easily afford the payments long term.

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

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Experion (1); Edmunds (2); KBB (3)

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