California CARS Act (SB766): New Auto Dealer Regulations Proposed in 2025
Overview of the Proposed California CARS Act and the Push for State-Level Dealer Regulation
California State Senator Benjamin Allen (D) has introduced the California Combating Auto Retail Scams (CARS) Act (the “Act”), SB766, which would add significant, duplicative, and additional regulations to auto sales and leases conducted by licensed dealers in California. Presumably in response to the Federal Trade Commission’s ongoing issues with the implementation of the federal CARS Rule, Senator Allen has sought to amend California law to add several new requirements targeting auto dealers.
Dealer Misrepresentation and Expanded Consumer Protections
The Act would prohibit a wide range of dealer misrepresentations, including:
- Those regarding the costs of acquisition (either purchase, lease, or financing)
- The costs of optional products or services
- The limitations and benefits of any optional products or services
- Whether the transaction is for a purchase or a lease
- The availability of any rebates or discounts as they relate to the advertised price
- The availability of advertised vehicles at stated prices
- Any pre-approvals or guarantees, information related to any credit applications
- When a transaction is final and binding
- What the dealer will keep should the transaction not go forward due to any action by the purchaser
- The payoff for any trade-ins
- The remedy available if the dealer fails to sell or lease a vehicle at the advertised price
- Governmental approval and association with the dealer or dealer personnel
- The terms of a potential repossession
- The ability to move a purchased vehicle out of California or the United States
- Any other required disclosures identified in the Act
As to these issues, current law already regulates dealers and provides for these protections for consumers. Those can be found in, among others, in the Automobile Sales Finance Act (Cal. Civ. Code § 2981, et seq.); the Vehicle Leasing Act (Cal. Civ. Code § 2985.7, et seq.); the Consumers Legal Remedies Act (Cal. Civ. Code § 1750, et seq.); the Rosenthal Fair Debt Collection Practices Act (Cal. Civ. Code § 1788, et seq.); the California Consumer Privacy Act (Cal. Civ. Code § 1789.100, et seq.); and in the California Vehicle Code (Cal. Veh. Code §§ 11713, et seq. and 38200(a)).
Dealer Disclosure Requirements for Advertised Pricing
The Act would require that the advertised price be “clearly and conspicuously” (defined in the Act) disclosed as to the specific vehicle and the monetary term or financing term. These obligations are already imposed on dealers by Cal. Veh. Code § 11713.16 and the federal Truth in Lending Act (12 CFR Part 1026 [Regulation Z]). These new regulations would also require that the advertised price be disclosed in the first communication with a consumer in response to that consumer’s inquiry. If that first response is in writing, the advertised price must also be disclosed in writing.
Regulation of Optional Products and Services
With respect to optional products, the Act would require that the optional nature of the product or service be disclosed, including the price, “clearly and conspicuously.” This is already required by the Automobile Sales Finance Act (Cal. Civ. Code § 2982.2) and California Vehicle Code (Cal. Veh. Code § 11713.3(h)). The Act would also prohibit the charging of optional products or services if the consumer would not benefit from the product or service. The Act specifically lists nitrogen-filled tires; products or services which would be duplicative or warranty coverage; GAP agreement where no benefit would be gained through its purchase; a service contract which did not provide for market value prices for repairs or which had exclusions based on preexisting conditions, including prior damage. All of these actions are already generally prohibited by the Consumers Legal Remedies Act (Cal. Civ. Code § 1770), and specifically as to GAP, by the Automobile Sales Finance Act (Cal. Civ. Code § 2982.12). The Act would also require payment of any optional products to the providing third parties within 10 days from the sale or lease.
10-Day Used Vehicle Cancellation Policy
One of the more consequential aspects of the proposed language in the Act would eliminate the contract cancellation option for used vehicles and replace that with a mandatory “10-Day Right to Cancel Used Car Purchase or Lease” where the consumer can back out of the transaction for a minimal restocking fee so long as the vehicle has been driven less than 2,000 miles and has only reasonable wear and tear. But even then, the Act would include language that contradicts these requirements, at least as to damage, as it would require dealers to accept returned vehicles with “beyond reasonable wear and tear” where the consumer does “not have the money to pay for the restocking fee or for damage the dealer claims is beyond reasonable wear and tear.” The minimal protections for dealers resulting from foreseeable and obvious abuse of this 10-day cooling off period is not addressed in the proposed language in the Act in any meaningful way. The proposed language of the Act does not address the issues that would arise from this trial period as it relates to commissions, financing approvals, or subsequent assignment of purchase or lease contracts to indirect lenders.
Recordkeeping Expansion: New Document Retention Obligations for Dealers
The Act would also expand the document retention policies regarding vehicle sales and leases. While the Automobile Sales Act requires some documents to be retained for the length of the contract or seven years, whichever is longer (Cal. Civ. Code § 2984.5), the Act would expand the documents to be maintained to include documents related to advertisements, transaction documents, communication, cancellation requests, and written complaints received.
Regulatory Overlap and Industry Impact
The Act would expand the document retention policies as to vehicle sales and leases. While the Automobile Sales Act requires some documents to be retained for the length of the contract or seven years, whichever is longer (Cal. Civ. Code § 2984.5), the Act would expand the documents to be maintained to include documents related to advertisements, transaction documents, communication, cancellation requests, and written complaints received.
The full text and legislative status of SB766 can be found here.
