SACRAMENTO, Calif. – Consumers who buy or lease a new or used car from a California dealer will have a number of 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, according to the San Francisco Chronicle, which noted that 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 share the same name: Combating Auto Retail Scams, or CARS.
Friendly Laws Get Friendlier
California already has the nation’s most consumer-friendly car-buying laws, and they will become even more so under SB766, Brian Maas, president of the California New Car Dealers Association, told the Chronicle. His association dropped its opposition to the bill after certain clarifications and amendments were made, the report stated, citing as an example that 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 Chronicle reported.
About the New Law
Three-Day Return Policy
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.
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.
Greater Pricing Transparency
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 told the Chronicle.
Under the law, 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, according to the report.
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, and 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.”
Government Fees
Options that are not mandatory, such as a maintenance contract or gap insurance — which covers the difference between the cash value of a car and the amount still owed on it if it’s stolen or totaled — are also covered under the new law, the Chronicle said.
Document Processing Fees
California currently caps “doc fees” at $70 or $85, depending on whether 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, the report stated.
But it also noted that 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.
Disclose Total Price
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.
No Worthless Add-Ons
A dealer cannot charge buyers or lessees for any additional product or service that would not benefit them. The Chronicle said 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.
• A surface-protection product that voids the manufacturer’s warranty for the paint job.
• Gap agreements not consistent with California law.
Document Retention
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.
