Yes you can cancel,but must be done with dealer,so you can open the application for a new car again
If you paid a deposit to dealer,then that is up to them,but really Motability do not expect any payment to be made until you inspect and put in your pin for the car,you can cancel at any time until then,if the dealer took £500 of you i would ask for it back, they are not supposed to ask for that,unless you ordered any extras,car not been built yet ? then no excuse as they can cancel or let other dealer take the slot and the car due to long delays the other dealers would jump at it.