New Protections for Used Car Buyers – Introducing the California Auto Retail Scams Act (CARS)

Despite being the state that sells the most used cars in the nation, California’s used car laws have left a lot to be desired over the years. Besides some basic required minimum disclosures, car dealers could sell a vehicle, the engine could drop out as the buyer was pulling off the lot, and so long as the vehicle was sold “As Is,” there was little to no legal recourse to protect the consumer. Well, that is drastically changing later this year.

On October 6, 2025, Governor Newsome signed Senate Bill 766, known as the California Combating Auto Retail Scams Act. (CARS) (Civ. Code Sections 1784.1 et seq.) SB 766 represents the most significant modification to the vehicle sale process since California's Car Buyer's Bill of Rights in 2005 (can you believe that was 20 years ago already) and enacts sweeping consumer protections aimed at eliminating deceptive practices in the retail sale and lease of motor vehicles.

SB 766 introduces consumer protections intended to:

• Prevent bait-and-switch pricing and misleading advertising;

• Ensure full transparency of total purchase or lease costs before contract signing;

• Eliminate valueless or forced add-on charges that provide no benefit to buyers; and

• Provide a first of its kind three-day review period for used car purchases.

While most bills take effect immediately the year after they are signed, the implementation of CARS was delayed until October 1, 2026 (Civ. Code § 1784.28), to give dealers time to adapt to the new requirements, change their paperwork, amend their contracts, conform their advertisements and update their signage.  

So, what’s in the new bill?

Prohibited Conduct and Consumer Rights (Civ. Code § 1784.40)

Under the new law, it is a violation of the CARS Act for any dealer to make misrepresentations about:

·      The costs or terms of purchasing, financing, or leasing a vehicle.

·      Any costs, limitation, benefit, or any other aspect of an add-on product or service.

·      Whether the final contract is for the lease or sale of a motor vehicle (but does not restrict the ability of a dealer to present multiple financing and lease payment options to the customer prior to the sale or lease of a motor vehicle).

·      The availability of vehicles at a total price communicated by the dealer.

·      Whether any consumer has been or will be preapproved or guaranteed for any product, service, or term.

·      Information on or about a consumer’s application for financing.

·      Whether the dealer will keep cash downpayments or trade-in vehicles, charge fees, or initiate legal process, or any action if a transaction is not finalized or if the consumer does not go forward with the transaction.

·      Whether, and if so, when, a dealer will pay off some or all of the financing or a lease on a consumer’s trade-in vehicle, and what happens if a dealer fails to pay off the trade-in vehicle within the time period required by law

·      The remedy available if a dealer fails to sell or lease a vehicle at the total price.

·      Whether, or under what circumstances, a vehicle may be repossessed.

·      Whether a vehicle can be moved outside of California or outside of the United States.

Mandatory Disclosures (Civ. Code § 1784.41)

The act now makes it a violation for any auto dealer to fail to disclose clearly and conspicuously a vehicle’s total price in any advertisement that references a specific vehicle for sale.

Dealers must disclose the total price of a vehicle in advertising and initial written communications. This must include all non-optional charges and fees but may exclude statutorily permitted items such as government taxes, title, and license fees. 

Dealers must conspicuously disclose that add-on products and services — such as service contracts, insurance offerings, or GAP coverage — are optional and not required to purchase or lease the vehicle. 

When referencing monthly payments, dealers are required to disclose the total cost over the life of the financing or lease agreement and make clear any cost increases associated with lower monthly payments. These requirements are intended to prevent low monthly payment advertising from obscuring the true cost of credit. If the total amount disclosed assumes the consumer will make a cash downpayment or has a trade-in vehicle, the dealer must disclose the amount of that downpayment or the trade in value to be provided by the consumer. This disclosure has to be in writing and be clear and conspicuous.

If the dealer makes any written comparison between payment options during the negotiation to purchase or lease a specific vehicle that includes discussion of lower monthly payments, the dealer must also disclose that lower monthly payments often increase the total amount the consumer will pay to purchase or lease the vehicle.

These transparency measures are designed to curb the “hidden fee” tactics previously prevalent in auto retail negotiations. 

Unlawful Add-Ons (Civ. Code § 1784.42)

The Act makes it unlawful for dealers to charge for certain items unless those products provide clear consumer benefit. Examples of such “junk” add-ons included in the Act are:

(1) Nitrogen-filled tire-related products or services that contain less than 95-percent nitrogen purity.

(2) Products or services that do not provide coverage for the vehicle, the consumer, or the transaction.

(3) A GAP agreement that is not in compliance with Section 2982, 2982.2, or 2982.12.

(4) A service contract if the service contract is void due to preexisting conditions, including prior damage from a crash or flood or preexisting mechanical conditions.

(5) Oil changes for electric vehicles.

(6) Catalytic converter markings for a vehicle that does not have a catalytic converter.

(7) Surface protection product that renders the manufacturer’s warranty for the paint job void.

Right of Cancellation & Cooling-Off Period for Used Vehicles (Civ. Code § 1784.41)

A hallmark feature of SB 766 is its creation of a three-day right to cancel for used vehicle purchases and leases for vehicles that cost $50,000 or less. This “cooling-off” period for used cars is a, first in the nation, protection intended to address issues that may not be apparent during a brief test drive, such as hidden damage, mechanical problems, or unexpected financing outcomes. 

This provision replaces the prior contract cancellation option agreement with a mandatory cancellation right that cannot be waived by the buyer. 

The new cancellation period must not end earlier than the dealer's close of business on the third calendar day after the vehicle is purchased. Therefore, a vehicle bought on a Monday, the end of the third day would be the close of business on Thursday.

The dealers are, however, allowed to charge a restocking fee equal to 1.5% of the vehicle price, with a $200 minimum and a $600 maximum. Additionally, the customer may not drive more than 400 miles during the three-day period. If the customer drives more than 250 miles during the three-day period, the dealer may charge an additional $1 per mile over that amount (for a maximum of $150). This is in addition to the restocking fee.

SB 766 adds new cooling-off language for the retail installment sale and lease contracts and requires dealers to update the cooling-off signage posted in their offices and any other cubicle or room where written terms are discussed and contracts are regularly executed. The updated signage must be in 36-point font and read the following:

"CALIFORNIA DOES NOT HAVE A COOLING-OFF PERIOD FOR NEW VEHICLES. BUT IF YOU PURCHASED OR LEASED A USED VEHICLE FOR $50,000 OR LESS, YOU HAVE 3 DAYS TO CANCEL THIS CONTRACT FOR ANY REASON. ADDITIONAL RESTRICTIONS MAY APPLY, INCLUDING A RESTOCKING FEE. ASK THE DEALER FOR MORE INFORMATION ABOUT HOW TO EXERCISE THIS RIGHT."

Recordkeeping (Civ. Code § 1784.44)

SB 766 mandates that dealers create and retain all records necessary to demonstrate compliance with the Act for a period of two years from the date the record is created.

The California Combating Auto Retail Scams Act represents one of the most comprehensive state-level efforts to reform auto retail practices in the United States. By making clear prohibitions on deception, mandating transparent pricing and disclosures, and creating a meaningful right of cancellation for used car buyers, the Act aims to align dealer conduct with consumer expectations of fairness and clarity. 

With an operative date of October 1, 2026, California will become a national leader in consumer protection within the automotive marketplace.