Dealers are in the right to request a deposit. The grey area is you don’t enter a legally binding contract with the dealer. The only contract that is entered is with Motability when you enter your PIN. Although the dealer might try it on after paying a deposit and you were to cancel, they aren’t legally obliged to keep any deposit payed and any deposit payed is part of the Advance Payment. That is my understanding.
Also see @Glos Guy comment here.
https://forum.whichmobilitycar.co.uk/forums/topic/cancellation-fee/