Here’s a scenario; you have your eye on your dream car on AutoTrader, so you contact the dealership, arrange a test drive, after which you apply for finance on the car that you are interested in and have locked the car deal down by signing an offer to purchase and paid a deposit to the seller or financial institution. The question is, does the payment of your deposit now mean that you are legally required to purchase the vehicle?
Why do we put a deposit down?
Before we examine whether it is legally binding or not, let us look at why we place a deposit down in the first place. While the deposit secures the vehicle for the buyer and ensures it is not sold to any other potential buyer, the real reason a deposit is put down is to reduce monthly premiums and ultimately reduce the amount of interest the buyer will pay on said load throughout the duration of the finance contract. The larger the deposit, the lower the monthly premium becomes and indeed, the lower the total amount of interest paid will be.
Is the deposit you pay legally binding?
In a word, no, the actual deposit is not legally binding, however, before a deposit can be paid, the buyer must sign an offer to purchase (OTP), a document that highlights the buyer’s intention to purchase said vehicle from the seller for a previously agreed-upon amount. The OTP is legally binding and when the OTP is combined with a signed delivery note which states that the buyer is happy with the vehicle, the buyer is well and truly legally bound to purchase the vehicle, provided there are no clear and evident defects with said vehicle that were improperly disclosed at the time of delivery. In some instances, if accessories were fitted as part of a previously agreed-upon deal which was detailed in the offer to purchase, the seller may have grounds to ensure the deal goes through even if the buyer wants to cancel the deal. In the event of a dispute, the Motor Industry Ombudsman of South Africa is available to submit.
