How California’s New Car-Buying Law Cracks Down on Junk Fees Starting October 1

California car buyers get a legal right to walk away from a used car purchase within three days, no reason required, once the state’s new dealer accountability law takes effect on October 1. The Combating Auto Retail Scams Act, known as the CARS Act, also forces every dealer in the state to show the real, all-in price of a vehicle before a customer signs anything, closing off several of the pricing tricks car buyers have complained about for years.

Governor Gavin Newsom signed the bill, SB 766, into law on October 6, 2025. California built it as a state-level replacement for the Federal Trade Commission’s Vehicle Shopping Rule, which a federal appeals court struck down in February 2025 before it ever took effect nationally.

The Three-Day Right to Cancel a Used Car Purchase

The headline change is a new no-cost cancellation window for most used vehicles priced at $50,000 or less. Buyers can return the car within three days for any reason, though the right comes with limits: the vehicle cannot have been driven more than 400 miles during that window, and the dealer can begin charging a mileage fee after the first 250 miles. Dealers can also charge a restocking fee between $200 and $600, capped at 1.5 percent of the sale price, whichever is lower.

The right does not apply to new vehicles, lease buyouts, auction sales, fleet sales, or used vehicles priced above $50,000. If a customer trades in a vehicle and then cancels within the three-day window, the dealer has to return whichever is greater: the trade-in’s fair market value, the actual cash value listed on the contract, or whatever amount the dealer already received for reselling it. That provision is designed to stop a dealer from quickly flipping a customer’s trade-in and then shortchanging them if the original deal falls through.

Dealers Have to Show the Real Price Upfront

The law requires dealers to clearly disclose a vehicle’s total price in any advertisement that names a specific car, and in the very first written communication with a buyer that references a specific vehicle or includes a payment or financing figure. That total price has to include every item already installed on the vehicle and any price adjustments, though government taxes, registration fees and the dealer’s document processing charge remain excluded from the headline number.

Advertising a car using only its MSRP, with a disclaimer saying that figure is not the real price, will no longer be allowed unless the MSRP genuinely is the dealer’s total advertised price. Dealers who discuss monthly payment options also have to disclose the total amount a buyer will pay over the life of that payment plan, along with a plain statement that lower monthly payments often mean paying more overall. Any pitch for an add-on product, like a service contract or paint protection package, now has to come with a clear disclosure that the customer can buy or lease the vehicle without it.

The Law Targets Specific Junk Fees by Name

The CARS Act bans dealers from charging for add-ons that provide no real benefit to the buyer. The law calls out several specific examples that regulators had flagged as common complaints: nitrogen tire fill packages that do not meet a 95 percent purity standard, GAP insurance agreements that do not comply with California’s financing rules, extended service contracts that would already be voided by a preexisting problem with the vehicle, and oil change packages sold on electric vehicles, which do not use engine oil at all. Dealers now have to keep records proving that any add-on they sell actually delivers the benefit it is being sold on.

Dealers must retain copies of every price disclosure, signed contract, payment worksheet and customer complaint for at least two years, whether or not the deal was ultimately completed. That recordkeeping requirement gives state regulators a paper trail to check against if a customer later disputes what they were told at the point of sale.

Why California Built Its Own Version of a Failed Federal Rule

The FTC spent years developing its own Vehicle Shopping Rule aimed at the same junk-fee and pricing-transparency problems nationwide, but the Fifth Circuit Court of Appeals vacated that rule in early 2025 before car buyers anywhere saw its protections take effect. Rather than wait for a federal replacement, California lawmakers built their own version through SB 766, incorporating many of the same goals while adding provisions, like the three-day cancellation right, that go further than what the federal rule ever proposed. The California New Car Dealers Association negotiated changes to the bill’s final language, which is part of why dealers retain the ability to exclude the standard document processing fee from the advertised total price.

Consumer advocates who backed the bill through the state Senate have described it as one of the strongest car-buyer protection laws in the country once it takes effect, given how directly it addresses complaints that have followed the used car market for years: hidden fees discovered at the finance desk, add-ons pitched as mandatory when they are optional, and financing terms that obscure the true cost of a lower monthly payment.

What This Means for Buyers Right Now

Nothing changes for California car buyers until October 1, 2026. Anyone shopping for a used car before that date still needs to watch for the pricing tactics the CARS Act is designed to eliminate, including add-ons bundled into a deal without a clear opt-out and financing pitches that lead with a monthly payment instead of the total cost. Buyers who close a deal on or after October 1 should ask specifically whether the vehicle qualifies for the three-day cancellation window, since it only applies to used vehicles priced at $50,000 or below, and should get the total price disclosure in writing before signing anything.

Dealers across the state are already adjusting advertising, sales paperwork and staff training ahead of the deadline, since the law’s disclosure and recordkeeping requirements touch nearly every step of a sale, from the first ad a buyer sees to the final signature at the finance desk.

Sources:

• ComplyAuto: California enacts the CARS Act, overhauling vehicle sales and leasing rules
• UC Berkeley Center for Consumer Law: California Senate passes landmark bill to protect car buyers
• California Legislature: SB 766 bill text
• Motoring Chronicle: How to spot a washed title before you buy a used car