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Consumers who buy or lease a new or used car from a California dealer will have meaningful new protections – including a first-in-the-nation right to return a used car for a refund within three days of purchase and improved pricing transparency – under a bill signed by Gov. Gavin Newsom this week.
SB766, which takes effect Oct. 1, 2026, was patterned and named after a regulation adopted by the Federal Trade Commission early last year under President Biden. In January, a federal appeals court in Louisiana nullified that regulation before it took effect. The FTC under President Trump has not challenged that decision or moved to readopt the rule. The California act and federal rule shared the same name: Combating Auto Retail Scams or CARS.
Sen. Ben Allen, D-Santa Monica, who authored the bill, said he was motivated by the FTC rule's demise and his own car-shopping experience. "Some of the behavior and standard business practice in the car sales world I found very dispiriting and distasteful. I wanted to make the car buying experience for regular folks better."
California already has the nation's most consumer-friendly car-buying, and it will become even more so under SB766, said Brian Maas, president of the California New Car Dealers Association. His association dropped its opposition to the bill after certain clarifications and amendments were made.
For example, the law as introduced would have given used-car buyers 10 days to return it for a refund. That would have given working people who buy a car on the weekend a chance to try it out and return it the next weekend, said Rosemary Shahan, President of Consumers for Auto Reliability and Safety, which led a coalition of consumer groups that supported the bill.
The enacted version gives people who buy or lease a used car for $50,000 or less up to three days to return it for any reason, as long as they didn't damage it or drive it more than 400 miles.
Dealers may impose a restocking fee equal to 1.5% of the car's price, but not less than $200 or more than $600. If the buyer has driven the vehicle more than 250 miles, the dealer may charge an additional $1 for each mile over 250 miles, up to $150.
Instead of the restocking fee, a dealer that charged a customer a shipping fee may keep the cost it actually paid for shipping if the car is returned.
The three-day return policy must be disclosed prominently at the point of sale and on the first page of the sale or lease contract. It does not apply to new cars or private-party transactions.
This new policy was not part of the FTC's CARS rule, and goes well beyond current state law.
California has never mandated an automatic "cooling off" period for new or used cars, but has provided some very limited return opportunities.
Under the California Car Buyer's Bill of Rights, dealers must offer consumers who purchase a used car for less than $40,000 a contract to cancel the purchase within two days for a fee that ranges from $75 to about $400 depending on price. Dealers can charge a restocking fee. Very few consumers have purchased such cancellation agreements, Maas said. They will be replaced by the new three-day return policy.
Under California's lemon law, a manufacturer must replace or repurchase a new car if it fails to fix a problem covered by the new-car warranty after repeated repair attempts. Late last year, the California Supreme Court ruled that the lemon law does not apply to used cars purchased with a balance remaining on the manufacturer's original new car warranty, unless "a manufacturer's new-car warranty is issued with the sale," which might happen when a dealer sells a demonstrator car.
Some big used-car dealers already offer returns. CarMax and Carvana offer a 10-day and seven-day money back guarantee, respectively, subject to certain fees and restrictions.
But California will be the first state to mandate a cooling-off period for all used cars.
Here are other major provisions of the new law:
When dealers advertise a specific vehicle, they must include its "total price" in all advertising including print, online and at the dealership. "Those provisions are much clearer than they are in existing law," Maas said.
Dealers also must disclose the total price in writing the first time a customer walks into the showroom and asks about a particular vehicle. Currently, buyers might not discover the total price until they are deep into negotiations or given the contract. "It's going to make it a lot easier for people to comparison shop," Shahan said.
The total price must include features or equipment that are not optional, such as a roof rack, tow hitch, special wheels or software attached to the car, Shahan said.
The total price also must include destination charges, which cover the cost of transporting the car from the plant to the dealer and can add $1,000 or more to the price.
The total price cannot deduct any rebates that are not available to all buyers, such as rebates for students, military members or "qualified buyers," Maas said.
The total price can exclude:
Government fees for taxes, title and license and electronic registration.
Options that are not mandatory, such as a maintenance contract or gap insurance, which covers the difference between the cash value of your car and the amount you still owe on it if it's stolen or totaled.
Document processing fees. California currently caps "doc fees" at $70 or $85, depending on if the dealer has a contract with the Department of Motor Vehicles. That's the lowest cap in the nation; some states such as Florida have no cap.
However, that cap will soar if Newsom signs another bill on his desk. SB791, passed last month, would allow dealers to charge up to 1% of the purchase price, capped at $260. Only three state legislators voted against that bill. Despite authoring the CARS bill, Allen said he initially opposed the doc fee increase but eventually voted for it because it was clearly going to pass.
The new CARS act also requires dealers, in any written representation about financing terms, to disclose the total amount the consumer will pay over the life of the loan. They also must disclose that lower monthly payments often increase the total cost.
A dealer cannot charge buyers or lessees for any additional product or service that would not benefit them. Examples include:
Nitrogen-filled tires, unless the nitrogen is at least 95% pure.
A service contract that's void because of pre-existing conditions, such as prior damage from a crash, flood or previous mechanical issues.
Catalytic converter markings for a vehicle without a catalytic converter.
Oil changes for electric vehicles, which don't use oil.
A surface-protection product that voids the manufacturer's warranty for the paint job.
Gap agreements not consistent with California law.
Dealers must create and retain, for at least two years, all records necessary to show compliance with the new law and provide them to the customer upon request. These include ads and communications about vehicle pricing, sales and lease contracts, add-on disclosures, service contracts, refunds, and consumer complaints.
This "hotly contested" provision should help consumers who want to bring auto fraud lawsuits over false or bait-and-switch advertising, Shahan said.
Normally new state laws take effect on Jan. 1 the following year, but dealers wanted the effective date for SB766 delayed until next October to give them time to understand it and train staff, Maas said.
Email Kathleen Pender at kathpender84@gmail.com
This article originally published at New California law means big changes for car buyers. Here's how it will work.
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