How California’s New Car-Buying Law Ends Hidden Dealer Fees Starting in October

Starting October 1, California car dealers must show buyers the full price of a vehicle, every mandatory fee included, before a single signature hits the paperwork. The California Combating Auto Retail Scams Act, known as the CARS Act, also hands used-car buyers a three-day window to return a vehicle for a full refund, a first for any state in the country. Economists project the law will save California car buyers $234 million a year and 8.5 million hours currently lost to deceptive sales tactics.

What the Law Actually Requires

Governor Gavin Newsom signed SB 766, authored by state Senator Ben Allen of Santa Monica, after consumer advocates spent years documenting dealer tactics that pad a car’s advertised price with fees buyers never agreed to. Under the new rules, dealers must display the total price of a vehicle in all advertising, a figure that has to include non-optional features and destination charges. Only government fees, meaning tax, title, and license costs, can stay off that headline number.

Dealers also have to clearly flag which add-ons are optional. A finance office can still offer GAP insurance or an extended service contract, but it cannot bundle those products into the price without telling the buyer they can walk away from them. The law specifically targets add-ons that provide no real benefit to a given buyer, an example regulators have cited repeatedly: an oil change package sold alongside an electric vehicle that has no oil to change.

A Three-Day Return Window for Used Cars

The law’s most talked-about provision lets a buyer return a used vehicle within three days for a full refund, so long as the purchase price sits under $50,000. Dealers can charge a reasonable restocking fee, but the core right to walk away stands. Rosemary Shahan, president of Consumers for Auto Reliability and Safety, the group that led the coalition supporting the bill, called it “the most sweeping reform of protections for car buyers since the Car Buyers Bill of Rights was enacted in 2005.”

The return period exists to solve a specific problem: a test drive lasting twenty minutes rarely surfaces the mechanical or electrical issues that show up after a week of real driving. A buyer who discovers a transmission shudder or an electrical gremlin on day two now has a legal path back to the dealer that did not exist in California before this law, rather than being stuck negotiating a private repair or eating the cost themselves.

Used-car sales carry more of this risk than new-car sales: a used vehicle arrives without a factory warranty covering the full drivetrain, and a buyer typically has far less information about how the previous owner treated the car. California’s return window does not apply to new vehicles, which already come with manufacturer warranties, or to used vehicles priced at $50,000 or more, a cutoff lawmakers set to keep the provision focused on the mainstream used-car market rather than luxury and exotic sales where buyers typically negotiate their own inspection contingencies.

Filling a Gap the Federal Government Left Open

California’s law directly mirrors a rule the Federal Trade Commission tried to implement nationally. The FTC’s CARS Rule would have banned dealer junk fees and required a single all-in advertised price at the federal level, and economists estimated it would have saved American car buyers $3.4 billion a year. A federal appeals court vacated the rule in a 2-1 decision, finding the FTC had not followed proper notice procedures before adopting it, and the agency formally withdrew the rule in February 2026.

That did not end federal scrutiny entirely. In March 2026, the FTC sent warning letters to 97 dealership groups across the country, covering more than 200 individual locations, including large public retailers such as AutoNation, Lithia Motors, Group 1 Automotive, Hendrick Automotive Group, and Ken Garff Automotive Group. The letters put dealers on notice that an advertised price has to reflect every mandatory fee, listing doc fees, dealer prep, e-filing charges, and vague “market adjustments” as the kind of costs that belong in the sticker price rather than tacked on afterward. Every recipient got the same form letter, and the FTC stressed that a warning letter is not a finding of wrongdoing, only a signal of heightened scrutiny.

With federal rulemaking stalled, consumer advocates have pushed states to fill the gap individually. Massachusetts already requires dealers to advertise a price that includes mandatory fees. California’s law goes further with its return-period provision, and consumer groups are already positioning it as a model. “We encourage state legislatures across the nation to act to protect auto buyers,” said John Van Alst, senior attorney at the National Consumer Law Center.

What This Means for Buyers Outside California

Drivers in other states should not expect the same three-day return right or all-in pricing mandate unless their own legislature passes something comparable, and most states have not. But California’s size gives the law outsized influence: automakers and large dealer groups that operate nationally often standardize practices across their networks rather than run different pricing disclosures state by state, the same pattern that played out with emissions standards and could shape sales practices more broadly if enough large dealer chains adjust their advertising nationwide to match California’s requirements rather than maintain separate systems.

Buyers anywhere can still protect themselves right now. Ask for the total out-the-door price in writing before starting financing paperwork, and get an itemized breakdown of every fee on the deal, not just the ones the dealer volunteers. Any add-on product, from paint protection to a service contract, should come with a clear statement that it is optional, and a buyer who is told otherwise can point to that as a red flag regardless of what state they are shopping in.

What Dealers Have to Do Before October 1

California gave dealers nearly two years between the bill’s signing and the law’s effective date specifically to retrain sales staff and rebuild advertising and paperwork systems around the new disclosure rules. Ted Mermin, director of the California Low-Income Consumer Coalition, described the shift bluntly: “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.”

Whether that promise holds once enforcement actually begins is the open question heading into October. California regulators will field the first wave of complaints once the return-window and pricing provisions become enforceable, and how aggressively the state pursues violations in year one will tell buyers, and dealers watching from other states, whether the CARS Act changes daily practice or joins a list of consumer protection laws that look strong on paper and thin in enforcement.

Enforcement will likely run through California’s existing consumer protection apparatus, including the state Attorney General’s office and the Department of Motor Vehicles, both of which already handle dealer licensing complaints. Consumer advocacy groups including Consumers for Auto Reliability and Safety have signaled they intend to track early complaints closely and publicize cases where dealers ignore the new disclosure and return-window requirements, a step that could pressure the state into faster enforcement action than a purely complaint-driven process would otherwise produce.

For California car shoppers, the practical advice between now and October 1 stays the same as it has been for years: get every number in writing, ask directly whether an add-on is required or optional, and walk away from any dealer unwilling to state a final price before running a credit application. Once the law takes effect, that final number is supposed to be the number a dealer leads with, not the number a buyer has to negotiate down to after an hour in a finance office.

Sources:

• Santa Monica Daily Press: California Enacts Nation’s Most Comprehensive Car Buyer Protection Law
• FTC: FTC Warns 97 Auto Dealership Groups About Deceptive Pricing
• CalMatters: New California laws will change car buying in 2026