What is a deposit?

When buying a brand new or second hand car, and as part of the process of forming a contract between you and the seller, it is commonplace for a business to ask for an initial payment equivalent to a percentage of the overall sale price. This signals to the retailer that you have an intention to purchase the vehicle, whilst also giving the business a means to recover any costs in the event that you choose not to proceed with the purchase. Once the deposit has been paid, this amount is often deducted from the final sum due.

It is also worth noting that a deposit differs to a reservation fee.