The new California Combating Auto Retail Scams (CARS) Act, which Governor Newsom signed on October 7, 2025, mirrors the thwarted efforts of the Federal Trade Commission (“FTC”) to address concerns about unfair or deceptive acts or practices among motor vehicle dealers. The California CARS Act will become effective on October 1, 2026, and will prohibit dealers from making misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle, or about any costs, limitation, benefit, or other aspect of any add-on product or service.
Applicability
The California CARS Act will constitute a new title within the state’s Civil Code[1] and will apply generally to motor vehicle dealers in the state. However, the new protections will not apply to “commercial purchasers” of vehicles, meaning those that purchase five or more vehicles from the dealer per year for use primarily for business or commercial purposes. They also will not apply to vehicles with a gross vehicle weight rating of 10,000 pounds or more.
Total Price
One of the key aspects of the California CARS Act (as with the FTC’s fallen CARS Rule) is the requirement to disclose the “total price.” Specifically, the Act will require dealers to disclose, clearly and conspicuously in connection with the sale or financing of a vehicle, the vehicle’s total price. That total price includes the total sales price of the vehicle, excluding taxes, fees, and charges; any dealer price adjustment; and the cost of any item installed on the vehicle at the time of the advertisement or communication. It does not include any deduction for a rebate. The total price must be included in any advertisement of a specific vehicle for sale, or that represents any monetary amount or financing term for a specific vehicle. In addition, the total price must be included in the first written communication with a consumer about a specific vehicle, such as the dealer’s first response to a consumer regarding the vehicle. The total price disclosure requirement does not, however, apply to used vehicles sold at auctions.
Other Disclosures
In addition to the disclosure of the total price of specific vehicles in advertisements and communications, dealers must disclose in any written representation during a negotiation to purchase or lease a specific vehicle that any add-on products or services the dealer mentions are not required. The disclosure must be clear and conspicuous and in writing. If the negotiation is taking place primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, the disclosure that the consumer may purchase or lease the vehicle without the add-on product or service must also be provided in that language.
When making any written representation about the amount of monthly payments to purchase or lease a specific vehicle, the dealer must disclose in writing the amount the consumer will pay after making all those monthly payments. If the dealer makes written comparisons between payment options that include lower monthly payments, the dealer must explain that those lower payments often increase the total amount the consumer will pay.
Add-On Products or Services
In addition to the requirement that dealers disclose whether add-on products or services are voluntary, as mentioned above, the California CARS Act will prohibit a dealer from charging for an add-on product or service if the purchaser or lessee would not benefit from the product or service. That will apply to any product or service that is not provided to the purchaser or lessee or installed on the vehicle by the manufacturer and for which the dealer, directly or indirectly, charges the purchaser or lessee in connection with the vehicle sale, lease, or financing transaction. The CARS Act provides certain examples, including nitrogen-filled tire-related products or services that contain less than 95% nitrogen purity; a service contract if the service contract is void due to preexisting conditions; oil changes for electric vehicles or catalytic converter markings for a vehicle that does not have a catalytic converter; or surface protection products that void the manufacturers’ warranties for the paint job. The Act explains, however, that dealers may charge for a product or service that the purchaser or lessee chooses to obtain, even if the purchaser or lessee ultimately does not use it or if a coverage event does not occur.
Three-Day Right to Cancel – Used Vehicles up to $50,000
The California CARS Act provides that in connection with the sale or lease of a used vehicle at retail at a price of up to $50,000, a dealer will be required to provide the buyer or lessee with a right to cancel the purchase or lease within three calendar days or 400 miles, whichever comes first. If the consumer exercises that right to cancel, the dealer may collect a restocking fee but must generally otherwise refund the consumer as required within 48 hours. The dealer also must return the consumer’s trade-in vehicle, if applicable, or its value or sales price if the vehicle has been sold. The CARS Act establishes requirements for determining the value under those circumstances. The dealer of such a used vehicle must provide the buyer or lessee a separate disclosure notifying the consumer of his or her right to cancel.
The dealer is prohibited from impeding the buyer or lessee from exercising the right to cancel, from overcharging the restocking fee, or from withholding the downpayment or trade-in vehicle after the right to cancel has been exercised. The prohibitions include claiming that the person authorized to return the downpayment or trade-in vehicle is not available.
Under California’s existing Automobile Sales Finance Act and its Vehicle Code, sellers under conditional sales contracts or dealers of used vehicles of less than $40,000 for a consumer purpose must generally offer a two-day contract cancellation option. The seller or dealer may charge a fee for the option. However, the new CARS Act will repeal the requirement to offer a contract cancellation option and will require the seller or dealer to provide the three-day right to cancel as described above if the transaction relates to a used vehicle up to $50,000.
Similarly, the state’s Vehicle Leasing Act, which applies to consumer-purpose lease contracts exceeding four months, currently requires those contracts to notify the lessee that the state imposes no cooling off period. However, the new California CARS Act will repeal that notice requirement, in favor of the requirement to offer the three-day right to cancel a consumer lease for a used vehicle up to $50,000.
In addition, the CARS Act will require dealers to display a notice in each sales office and cubicle where written terms of a specific sale or lease are discussed, and in each room of a dealer’s established place of business where sale and lease contracts are regularly executed. The signs, which must be in at least 36-point type, must notify customers of the three-day cancellation period for applicable vehicles, and encourages them to ask the dealer for more information.
As indicated above, the three-day right to cancel will not apply to commercial purchasers or vehicles of 10,000 pounds or more.
Recordkeeping
Dealers subject to the CARS Act will need to create and retain for two years records of their communications and advertisements of vehicles’ total price; copies of all purchase orders, financing and lease documents; records demonstrating that buyers were advised of the optional nature of add-on products; copies of cancellation requests and proof of refunds; and copies of all written complaints from consumers relating to the sale, financing, leasing, or cancellation requests.
No Express Private Right of Action
Previous versions of the CARS Act expressly included a private right of action under the Consumer Legal Remedies Act and the Unfair Competition Law. However, the enacted version does not include that express provision.
States Stepping In
As mentioned above, in 2024, the FTC issued a CARS Rule that would have addressed many similar acts or practices – including prohibiting misrepresentations about the costs or terms of the sale of vehicles or add-on products or services, prohibiting charging consumers for add-on products or services that do not provide a benefit, and requiring certain disclosures about the actual price of the vehicle. However, as we described here, in January 2025 the Fifth Circuit Court of Appeals vacated the FTC’s CARS Rule on procedural grounds, and the agency has not attempted to resurrect the rulemaking. That ruling has not prevented the agency from pursuing actions against individual dealerships related to add-on products and concerns about deceptive practices.
Still, states are stepping in to address their concerns through statutes and regulations. For instance, Pennsylvania amended its Automotive Industry Trade Practices law, effective August 19, 2024, to expand the definition of “advertisement” for motor vehicles to include online statements and representations, and require written disclosure of certain vehicle conditions. Massachusetts issued regulations in March 2025 broadly requiring clear disclosures of the “total price” of a product and restricting hidden fees, reflecting the CARS Rule principles of price transparency. In May 2025, Oregon revised its motor vehicle retail installment contract statute to require notice to the buyer of the right to void the contract if a lender does not agree to purchase the contract on the exact negotiated terms within 10 calendar days. Other states are similarly poised to address hidden fees and other unfair practices in auto sales and financing and more broadly.
[1] Commencing with new Cal. Civ. Code § 1784.20.