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One particular sector of the car market is about to become way more customer-friendly
THE days of reading tea leaves to discern the true price of buying a car from a dealership are no more for one major American state.
Now, dealerships are required to be upfront with their pricing as part of a major law which benefits prospective car purchasers.
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California Governor Gavin Newsom signed the Combating Auto Retail Scams (CARS) Act into law on October 6, bringing with it sweeping reform for the state’s used car market.
The law most notably forces dealerships to be upfront with the true total cost of a vehicle, applying to advertisements and price quotes as well.
Also prohibited under the law is misrepresenting facts about a vehicle’s sale, lease, or financing plans, as doing so can muddy the waters on a car’s true cost.
These mandates additionally cover how add-on products and plans are both factored into a car’s price and advertised alongside the car.
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The law further addresses add-on products and plans by giving customers 10 days to pay for these optional purchases, previously being required to pay them alongside purchasing the vehicle.
Dealerships are also no longer allowed to charge for add-ons which give customers no tangible benefit, such as redundant protection products and superfluous services.
Furthermore, dealers must now disclose that GAP insurance, service contracts, and other extra purchases are optional.
Documents concerning these purchases, as well as advertisements, sales contracts, and return documentation must now be kept on file by dealerships for two years.
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This will give regulators more tools to both monitor misconduct, and help resolve any disputes between dealers and their customers.
However, arguably the biggest impact the CARS Act will have is on the used car market, where it is introducing a three-day return rule for used vehicles priced below $50,000.
If the driver hasn’t damaged the vehicle and has driven less than 400 miles since purchasing it, they can return it within three days, no questions asked.
This return policy also applies to commercial vehicles purchased by small businesses, as well as vehicles purchased with the explicit intention of being used to provide ride-share services via apps such as Uber or Lyft.
While owners will be able to get out of their financing contracts without issue after executing this right, they will still be on the hook for a restocking fee of $200 to $600 depending on the car’s price.
The law will go into effect on October 1, 2026 in order to give dealers time to adjust to the major changes it will introduce.
Here are some expert tips when purchasing a car from a dealership lot:
Source: Kelley Blue Book
Industry experts say the act will eliminate the biggest issue in buying a used car, that being a willingness to trust dealers.
“When it comes to used cars, trust is the biggest issue. You’re removing the biggest barrier to entry by giving people a cooling off period,” explained Ivan Dury, Director of Insights at Edmunds to local CBS affiliate KFMB.
The CARS Act is part of a larger effort aimed at lowering family living costs, hence the act’s emphasis on used vehicles which are more affordable, but come with some risks.
California’s new law comes at a time where used car dealerships especially are facing significant issues, as is the case with Texas-based Tricolor Auto Group which filed for bankruptcy in September.
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However, even manufacturer dealerships are facing hardships, especially EV-heavy brands like Ford and exclusively electric automakers such as Rivian after the discontinuation of the $7,500 EV purchase tax credit.
Yet some argue the move away from EVs will be good for dealerships, pointing to cases where locations forced to go all in on EVs ended up folding as a direct result.
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