California car buyers get new protections against hidden dealer fees and unwanted add-ons

California CARS Act took effect Oct. 1

California’s Combating Auto Retail Scams Act took effect on Oct. 1, 2026, changing how car dealers across the state advertise prices and handle sales. Senate Bill 766 was introduced by state Sen. Ben Allen and signed by Gov. Gavin Newsom on Oct. 6, 2025.

The law covers vehicle prices, optional add-ons, financing disclosures, and used car cancellations at California dealerships. It is codified in California Civil Code sections 1784.20 through 1784.44 and establishes requirements for dealer advertising, customer communications, contracts, and records.

Dealers must show the total price

California dealers must disclose a vehicle’s total price when an advertisement identifies a specific vehicle or states its price or financing terms. The same requirement applies to a dealer’s first written response about a specific vehicle, including an email or text message.

The disclosed total includes dealer markups and items already installed on the vehicle. Taxes and government fees are excluded, and dealers cannot reduce the displayed total by subtracting rebates that a particular buyer might not receive.

Written add-ons must be called optional

California dealers must clearly state that an add-on is optional when discussing the product or service in writing during negotiations. The written disclosure must explain that the buyer or lessee can get the vehicle without purchasing the add-on.

The rule covers products such as service contracts, GAP agreements, theft protection, and surface protection products. When negotiations mainly occur in Spanish, Chinese, Tagalog, Vietnamese, or Korean, the required written disclosure must also be provided in that language.

Some add-on charges are prohibited

Dealers cannot charge buyers for add-ons that provide no benefit under the California CARS Act. Examples include oil changes for an electric vehicle and catalytic converter markings on a vehicle without one.

Other examples include nitrogen tire fills below 95% purity and service contracts made unusable by preexisting vehicle damage. The law also covers a noncompliant GAP agreement and a surface protection product that voids the manufacturer’s paint warranty as examples of add-ons that provide no benefit.

Monthly quotes need the full cost

Written monthly payment quotes must disclose the total amount a customer would pay over the full term at that payment. Dealers must include any down payment or trade-in value assumed when calculating the quoted monthly amount.

If a dealer makes a written comparison between payment options that includes lower monthly payments, it must disclose that lower payments often increase the total amount paid. These rules provide customers with both the monthly payment amount and the total cost information associated with the financing terms presented in writing.

Dealers face new sales disclosure rules

Dealers are prohibited from misrepresenting material facts about vehicle costs, financing terms, add-ons, and whether the final contract is for a lease or sale. The law also prohibits false claims about whether a customer has been preapproved or whether a vehicle is available at a total price communicated by the dealer.

Dealers cannot misrepresent whether they will keep a down payment or trade-in if a transaction is not finalized. They also cannot misrepresent whether and when trade-in financing or a lease will be paid off, or whether and under what circumstances a vehicle may be repossessed.

Used cars get a 3-day cancellation right

Used vehicle buyers and lessees can cancel qualifying California dealer transactions during 3 days without buying a separate cancellation option. The automatic right covers used vehicles priced at $50,000 or less and replaces the previous system that required dealers to offer buyers a paid 2-day cancellation option for certain used vehicles under $40,000.

The 3 calendar days begin on the day after the agreement is signed. If the third day falls on a day the dealership is closed, the deadline extends to the next day the dealership is open and ends at the close of business.

The cancellation right has exceptions

The 3-day cancellation right applies to qualifying retail purchases and leases of used vehicles from California dealers. It excludes new vehicles, auction sales, motorcycles, lease buyouts, fleet sales, vehicles rated at 10,000 pounds or more, and sales to commercial purchasers who buy 5 or more vehicles from that dealer per year, primarily for business use.

The vehicle must be returned before the buyer has driven more than 400 miles after signing the agreement. Buyers must personally return the vehicle during business hours in the required condition, along with other cash or items received in the transaction.

Restocking fees are capped

Dealers may charge a restocking fee equal to 1.5% of the vehicle’s sale price when a qualifying used car transaction is canceled. The fee has a minimum of $200 and a maximum of $600, and it can be deducted from the customer’s refund.

Mileage can create an additional charge after the vehicle has been driven more than 250 miles. A dealer may charge $1 for each mile above 250, up to an additional $150, and driving more than 400 miles ends the cancellation right.

Refunds are due after cancellation

Dealers must cancel the contract and issue the required refund no later than 48 hours after a buyer or lessee exercises the right to cancel. If the original payment is not immediately verified, such as a check, the dealer may delay the refund until 2 business days after verification.

The dealer must also return the customer’s trade-in unless it has been sold or its title transfer has begun. In that case, the customer receives the greatest of the agreed trade-in value, sale price, or fair market value, minus any amount needed to satisfy debt secured by the trade-in.

Contracts must flag the 3-day right

Dealers must place a warning about the cancellation right on the first page of a qualifying used vehicle contract. Buyers and lessees must also receive a separate form explaining the 3-day right to cancel a used vehicle purchase or lease.

Dealers cannot impede a valid cancellation, overcharge the permitted restocking fee, or improperly keep a down payment or trade-in. The law also prohibits dealers from making unsupported claims about damage beyond reasonable wear and tear or claiming that the person authorized to return the down payment or trade-in is unavailable.

Dealers must keep records for 2 years

California dealerships must keep compliance records for 2 years under the new law. Required records include advertisements, customer communications, and cancellation requests connected to vehicle sales and cancellations.

A dealer must also retain its first written communication with a customer about a specific vehicle when the pricing disclosure requirement applies. Customers can request a copy of that initial communication to preserve access to the dealership’s initial total-price information.

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California followed a federal court ruling

California adopted its CARS Act after a federal rule with the same acronym was vacated by a federal appeals court. The FTC finalized the federal CARS Rule in December 2023, published it on Jan. 4, 2024, and the Fifth Circuit vacated it on Jan. 27, 2025.

The court found that the FTC failed to issue an advance notice of proposed rulemaking required by its own regulations. The FTC formally withdrew the vacated rule on Feb. 12, 2026, while California’s law took effect on Oct. 1, 2026, with protections covering pricing, add-ons, financing disclosures, and qualifying used-vehicle cancellations.

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California’s new car-buying rules change how dealers disclose prices and handle qualifying used-car returns. Know the rules before signing your next dealership contract.

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This slideshow was made with AI assistance and human editing.