California has enacted the nation's most comprehensive car buyer protection law, creating a first-in-the-nation three-day return period for used vehicles and requiring dealers to provide transparent pricing while banning deceptive sales practices.
Gov. Gavin Newsom signed SB 766, the California Combating Auto Retail Scams (CARS) Act, authored by Sen. Ben Allen, D-Santa Monica, to combat what consumer advocates call predatory dealer tactics that have cost car buyers billions of dollars nationwide.
"This bill will codify best-in-class protections for California car buyers – protecting folks from junk fees and imposing much-needed transparency on advertised car prices," Allen said. "It'll make a real difference for consumers by making the car buying experience more fair and transparent."
The legislation is projected to save California car buyers $234 million annually and an additional 8.5 million hours that would otherwise be spent navigating deceptive sales practices, according to economic analyses.
The law mirrors a federal rule developed by the Federal Trade Commission that was overturned by a federal appeals court on procedural grounds before it could take effect. Leading economists had estimated the federal rule would have saved American car buyers $3.4 billion annually.
Under the California law, car dealers will be prohibited from misrepresenting vehicle prices and must provide transparent information about the full offering price and total payments. Dealers must also clearly identify which add-on services are optional and cannot charge for add-ons that provide no benefit to consumers, such as oil change packages for electric vehicles.
The legislation's signature provision establishes a three-day cooling-off period allowing consumers to return used vehicles for a full refund, though dealers may charge a reasonable restocking fee. The return period gives buyers time to identify problems that might not surface during brief test drives.
"The California CARS Act is the most sweeping reform of protections for car buyers since the Car Buyers Bill of Rights was enacted in 2005," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, which led the coalition supporting the bill. "The 3-day cooling off period for used car buyers promises to be a game-changer."
The law addresses long-standing complaints about dealership practices that consumer advocates say exploit buyers through bait-and-switch advertising, hidden fees and high-pressure sales tactics for unnecessary add-ons.
"This bill is a significant step forward for California consumers and for an industry that has been allowed to get away with outrageous sales tactics for far too long," said Ted Mermin, director of the California Low-Income Consumer Coalition. "Today, when you ask a car dealer how much a car costs, you're going to get a three-hour wait in an office. When the CARS Act takes effect, you're going to get a direct answer."
The legislation takes effect Oct. 1, 2026, providing dealers nearly two years to train employees and implement compliance procedures.
Consumer advocates praised California for acting where federal regulators have not. Under the current federal administration, the FTC has not reissued the overturned rule despite economic projections showing significant consumer savings.
"As the FTC abandons protections for car-buyers, it's great to see California stepping up to fight hidden costs and wasted time," said Sam Levine, senior fellow at Berkeley's Center for Consumer Law and Economic Justice and former director of the FTC's Bureau of Consumer Protection.
The National Consumer Law Center called the legislation a model for other states.
"The CARS Act will protect millions of Californians from costly auto sales scams and make the car-buying experience easier and more transparent," said John Van Alst, senior attorney at the center. "We encourage state legislatures across the nation to act to protect auto buyers."
The Consumer Federation of America echoed support for the state-level approach.
"It's great to see California stepping up to help fill the void at the FTC in protecting car buyers from predatory car dealers and lenders," said Erin Witte, the federation's director of consumer protection.