"Yes, I'm confused why the dealership are SS in this situation, sounds like they're just exercising their rights to me. Putting a deposit on something shows intention to buy and prevents the seller from selling it to anyone else until you've paid the balance and picked up the item. Then your daughter decided she hated the car, but in the meantime they may have lost out on selling it to anyone else, over a weekend, when most car sales are made. So I think they're entitled to keep it, because they've potentially lost a sale through your daughter changing her mind."
Their malfunction isn't in depositing the check, it's in telling her that they were returning the deposit, and then depositing the check a week later. If they intended to keep the deposit, then it behooves them to say so at the outset, not promise to destroy the check, sit on it for a week and then process it.