California CARS Act: What Dealers Must Change Before October 1, 2026

California Senate Bill 766, the California Combating Auto Retail Scams (CARS) Act, was signed on October 6, 2025 and becomes operative on October 1, 2026. It lives at Civil Code sections 1784.20 through 1784.44, and it changes how you advertise a price, how you answer a lead, how you sell add-ons, how you quote a payment, how you take a used car back, and what you keep on file afterward.

This is not a form you add at the F&I desk. It reaches the price on your vehicle detail page and the first automated email your CRM sends. Below is the whole thing broken into eight steps, in the order most stores will want to do them.

What actually changes

Two things worth knowing before you start. The act says it must be construed liberally in favor of consumers, and any waiver a customer signs is void. Its remedies also stack on top of everything else already available under California law, so this does not replace your existing exposure. It adds to it.

Who is covered, and who is not

It applies to licensed California dealers. The definition of "vehicle" carves out:

• Wholesale sales.
• Vehicles not required to be registered under the Vehicle Code.
• Fleet sales, meaning more than one vehicle in a single transaction for business use.
• Sales to commercial purchasers, meaning someone who buys five or more vehicles from you a year for business use.
• Anything with a gross vehicle weight rating of 10,000 pounds or more.

Separately, motorcycles are not "used vehicles" for the cancellation right, the price disclosure rules do not apply to a used vehicle sold at auction, and the cancellation right does not apply when a lessee already in possession buys out their own lease.

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Step 1: Put the total price on everything you publish

Total price has to be disclosed clearly and conspicuously in any advertisement referencing a specific vehicle for sale, and in any advertisement showing a dollar amount or financing term for a specific vehicle.

Total price includes any dealer price adjustment or market adjustment, plus the cost of anything already installed on the car at the time of the ad. It excludes the charges already listed in Vehicle Code section 11713.1(e): taxes, vehicle registration fees, the California tire fee, the state certificate of compliance fee, finance charges, a dealer document processing charge, an electronic registration or transfer charge, and emission testing up to $50 plus the actual certificate fees.

And it cannot be reduced by a rebate. You may still show rebates and incentives separately, but the total price stands on its own.

A dealer advertises an SUV at $24,995. The car already has a $995 theft-recovery unit fitted. Because the product was on the vehicle when the ad ran, its cost is part of the total price. The number in the ad has to be $25,990, not $24,995 with the rest explained at the desk.

This is the step that takes the longest, because it means auditing your website, your marketplace feeds and your paid vehicle ads together, then deciding what to do about the units that already carry accessories.

Step 2: Rewrite your first written response

Here is the part most stores will miss. The total price must appear at least once in your first written response about that specific vehicle, whenever the response references a specific vehicle for sale or any dollar amount or financing term.

The statute says "written communication" without limiting it to a worksheet. In practice that means your email templates, your SMS auto-replies, your web chat scripts and every automated CRM first-touch. If a lead comes in on a car and your system fires back a friendly note with a payment estimate in it, that note now needs a total price.

You also have to keep a copy of that first communication for two years and give the customer a copy on written request.

One relief valve: an interactive pricing tool that lets a shopper move the down payment, credit tier, rate or term does not itself create a record you must retain, as long as it does not change or misstate the advertised total price.

Step 3: Clean up add-ons

Two separate obligations here.

Disclose that they are optional. Whenever you make a written representation about an add-on during negotiation, you must say at least once, in writing, that the add-on is not required and the customer can buy or lease the vehicle without it. If the deal is negotiated primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean, that disclosure has to be in that language too.

Stop charging for products that cannot help the buyer. The statute names seven examples outright:

• Nitrogen tire products or services with less than 95 percent nitrogen purity.
• Products or services that do not cover the vehicle, the customer or the transaction.
• A GAP agreement that does not comply with Civil Code sections 2982, 2982.2 or 2982.12.
• A service contract voided by a preexisting condition, including prior crash or flood damage.
• Oil changes for an electric vehicle.
• Catalytic converter marking on a car with no catalytic converter.
• Surface protection that voids the paint warranty.

There is a third requirement buried in the same section and it is easy to overlook: you must pay the add-on provider within 10 days of the customer signing, unless your agreement with them sets a later date and coverage is not affected.

None of this bans add-ons. You can still sell a product the customer chose and that could genuinely benefit them, even if they never end up using it because the covered event never happens.

Step 4: Add the total-of-payments line to every quote

When you put a monthly payment in writing during negotiation, you must also disclose, clearly and in writing, the total amount the customer will pay after making all payments as scheduled.

If that number assumes the customer brings something to the table, a cash down payment or a trade allowance, you have to disclose the amount of that contribution as well. Same five-language rule applies.

And if you make a written comparison between payment options that talks up a lower monthly payment, you have to say that lower payments often increase the total the customer pays. Again, an internet tool that lets shoppers adjust financing parameters is not a violation on its own.

These disclosures can ride along inside the document that already carries your Civil Code 2982.2 itemization, so you do not necessarily need a new piece of paper.

Step 5: Build the three-day cancellation kit

From October 1 you cannot sell or lease a used vehicle at retail for $50,000 or less without giving the buyer a three-day right to cancel. Unlike the old system, the customer does not pay for this right.

How the clock runs. The window is the three calendar days beginning the day after the contract is executed, ending at close of business on the last day. If the third day falls on a day you are closed to the public, the window extends to the next day you are open. Days one and two never extend it.

When the right is gone. If the car has been driven more than 400 miles between signing and the attempt to cancel, there is no right to exercise.

What you may keep. A restocking fee of 1.5 percent of the sale price, never less than $200 and never more than $600. If the car has been driven over 250 miles, you may add $1 per mile above 250, capped at $150. If you charged a shipping fee to transport the vehicle, you may instead keep your actual shipping cost, as long as it does not exceed what the percentage formula would have allowed, and you refund the difference.

The paperwork. Three separate items, and the wording of two of them is prescribed:

1. A separate document titled "3-Day Right to Cancel Used Car Purchase or Lease", in the negotiating language where the five-language rule applies. It has to spell out the deadline, how both halves of the restocking fee are calculated, the 400-mile limit, exactly what the buyer must hand back, and what happens to their trade.
2. A notice on the first page of the purchase or lease agreement, in the statute's own words, starting "CALIFORNIA DOES NOT HAVE A COOLING-OFF PERIOD FOR NEW VEHICLES."
3. A physical sign in at least 36-point type in every sales office, every sales cubicle where written terms are discussed, and every room where contracts are signed. If you sell motorcycles or off-highway vehicles at the same location, the sign needs an extra line saying the cooling-off period does not cover them.

What the buyer has to bring back. To exercise the right they must personally deliver, during business hours: any restocking fee not covered by their refund, the vehicle free of liens other than the ones from your own deal, in the same condition apart from reasonable wear and any defect that showed up on its own, plus any other cash or items they got in the deal. Keep documentation of any damage beyond reasonable wear, because claiming damage without a reasonable basis is itself a violation.

Step 6: Write the trade-in and refund procedure

This is the hardest operational change, because it collides with how fast most stores move a trade.

If the buyer cancels, you return their trade-in and their keys. If you have already sold it or started the title transfer, you owe them the greater of:

• The agreed-upon value in the sales or lease agreement.
• What you sold it for.
• Its fair market value.

You may deduct what is needed to satisfy debt secured by the trade, but the customer gets an itemized cancellation receipt showing the basis for each deduction and the date and time they cancelled. If you tell them you sold the trade, you have to give them the sale document with the buyer's personal information redacted.

On fair market value, the act gives you a rebuttable presumption if you use either of two methods: a written offer to buy the trade that the customer received and you honor, valid at least seven days, or the trade-in valuation in a nationally recognized pricing guide you select, judged on the vehicle's condition when it was traded in. Picking your method in advance is worth doing now rather than during an argument.

The refund deadline is 48 hours from the moment the customer cancels. You cancel the contract and refund in full, less allowed deductions. You are not on the hook for delays outside your control, such as a bank or card processor. If the customer paid by a method with no immediate verified transfer, a check for instance, you may wait until two business days after the payment verifies, and you must give them documentation showing when that happened.

The act also lists eight things you must not do around a cancellation, including impeding it, overcharging the fee, withholding the down payment or trade, and claiming that the person who can release the money is unavailable.

Step 7: Turn on two-year recordkeeping

You must create and retain, for two years from the date each record is created, everything needed to show compliance. The statute names:

• Records showing your ads and communications carried the total price, including internet listings.
• All purchase orders and signed financing and lease documents, whether or not the contract was ever approved or assigned, plus written communications with anyone who signed one.
• Add-on records, including service contracts, GAP agreements, proof you paid the provider on time, and loan-to-value calculations where GAP is involved.
• Cancellation requests, proof of refunds, and proof trade-ins went back.
• Written complaints and written add-on inquiries, along with your responses about the vehicles involved.

Two useful details. Customer surveys, reviews and posted testimonials are explicitly not complaints for this purpose. And you may keep all of it in any legible form, in the same manner and place you already keep records. Failing to keep them is itself a violation, so retrievability is the real test.

Step 8: Train the floor, then work the list

Sales, desk, F&I and accounting all touch something here. The desk needs to know how the three-day clock runs. F&I needs the new add-on script. Accounting needs to know a restocking fee is not taxable gross receipts, which is covered below. Marketing owns the ads.

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Three changes that are easy to miss

The paid cancellation option goes away. SB 766 repeals Vehicle Code section 11713.21, the current contract cancellation option agreement you sell for $75 to 1 percent of the price on cars under $40,000, with its $175 to $500 restocking fees. If your menu, your forms or your DMS still offer it after October 1, that is a live problem. The new right is free, applies up to $50,000, and carries a different fee schedule.

Restocking fees are not taxable. The act amends Revenue and Taxation Code section 6012.3 so that restocking fees under the new section, and the portion of the sale price returned to the buyer, stay out of gross receipts and sales price. Your accounting treatment changes along with the fee.

There is a 13-item misrepresentation list. Section 1784.40 makes it a violation to misrepresent material information about, among other things, the costs or terms of a deal, whether a customer is preapproved, whether a vehicle is actually available at the price you communicated, whether and when you will pay off a trade, whether you will keep a down payment or trade if the deal falls apart, and whether you or your products are affiliated with any government agency. Most of this is already bad practice. Now it is a named violation of a statute that must be construed liberally against you.

Where AutoDealer.io fits

SB 766 is a legal requirement, but the part that bites is a data problem. The act asks you to prove, two years later, what a listing said, what your first email quoted, which add-on was disclosed as optional, when a trade went back, and when a refund cleared. Stores that keep pricing in one system, conversations in another and documents in a third will spend the next two years reconstructing deals.

Our dealer management software keeps inventory, leads, deals, documents and reporting in one place. The automotive CRM logs messages and customer activity and carries trade and finance details into the deal, so the first written response and the deal file are not separate archaeology projects. Our dealer compliance software covers document storage and a timestamped audit history.

No system makes a dealership compliant on its own. We provide the workflow and the record trail. Deciding what your forms say, what your disclosures look like and how your process runs is still yours, with counsel.

Frequently asked questions

When does the California CARS Act start?

October 1, 2026. It was signed October 6, 2025 as Chapter 354.

Does the three-day right apply to new vehicles?

No. It covers qualifying used vehicle purchases and leases only. The required contract notice says so explicitly, in capitals, on page one.

Can we charge the customer for the right to cancel?

No. The right itself is free. You may charge the restocking fee and mileage charge only if they actually exercise it.

Can we subtract a rebate from the advertised total price?

No. Total price cannot be reduced by a rebate. Show rebates and incentives separately.

What if a customer drives 500 miles and then tries to return the car?

The statutory right is gone past 400 miles. Document the odometer reading. Their other remedies under other laws are unaffected.

Can we offer a better deal than the statute requires?

Yes. You may offer a longer window, more vehicles or a lower restocking fee, and adjust the required notices to describe what you actually offer.

Does this apply to a lease buyout?

No, not where the lessee already has the vehicle before the sale.